Maximum contribution

[FJR]

Does this work for plan year ending 2002?

Husband and Wife have a 401(k) plan with no other EE's.

Plan has been updated with EGTRRA amendment.

Husband salary $250,000

Wife = $30,000

Each are over 50 in age.

Each puts in $12,000 by 12/31/02

Husband gets total contribution of $41,000

Wife gets a total contribution of $29,500

$230,000 X 25% = 57,500.00 + $22,000 = $79,500(Total deductible Cont.)

$2,000 in Catch up contributions

wife gets the $17,500 + the 12,000 in 401(k) contributions ?

[Archimage]

Your calculations are fine but there are a few things to consider:

1. The deferrals of $22,000 would not be deductible as an employer contribution but would be deductible as a business expense under IRC 162.

2. If this is a sole proprietorship the total contribution will change due to the calculation involving half of the social security tax.

3. You could also give the wife more since you have not reached your 404(a) deduction limit up to her 415 limit of $30,000.

[david rigby]

If additional cash is available, this couple might be a good candidate for a DB plan also.