Two trips up the 415 limit OK, if employed by more than one unrelated

[Guest sue c]

We have a client who works for two separate unrelated companies. Assume he has $200,000 comp from both plans. I understand that the $12,000 salary deferral limit is a personal limit, so that if he defers $12,000 in one employer's plan, he cannot defer in the other plan. What about the $40,000 annual additions limit? If the two separate plans warrant it, can he actually receive $40,000 annual additions from both plans?

[MGB]

Yes.

This had become so pervasive in the 1980s (doctors would work for multiple unrelated doctors every Friday on a rotating basis and be covered under multiple DB plans with full benefits in each) that it prompted them to add the 15% excise tax on excess distributions. Although they later repealed it, the reason for it originally was this very situation. There is no way for them to stop the multiple 415 limits, so they had decided to penalize them on the back end instead. In the current environment without the 15% tax, the multiple employer scam is back in full force. Obviously, there are legitimate situations where multiple employers are involved and they can each provide a full 415 limit, too.