Catch-Up & 402(g) Limit on Off Calander PYE

[Guest D C Sharp]

I need some additional input on how ADP failures recharacterized as catch up contributions at the end of a noncalendar plan year should be handled in calculating the 402(g) limit.

I am using the 'Catch-Up Contribution Worksheet for Noncalendar Plan Year' provided by Sal Tripodi and am running into testing results which are causing 402(g) failures that I am unable to justify.

Example:

I am working on a 3/31 plan year end and have an HCE, older than 50, who has deferred the following amounts:

1/1/2001 - 3/31/2001..... -0-

4/1/2001 - 12/31/2001..... 10,500

1/1/2002 - 3/31/2002..... 1,000

4/1/2002 - 12/31/2002..... 11,000

1/1/2003 - 3/31/2003..... 2,000

At PYE 3/31/02 the catch-up worksheets were used and no failures occured on the 402(g), plan limit or 415(limit). ADP failure did occur for 624.00. There was 1000 still available and the refund was not processed and the 624.00 was recharacterized as 'Catch-Up'. Everything is fine up to this point.

The calculation provided in the worksheet for the remaining 402(g) limit (for the calendar year in which the plan ends) advises to take the limit for calendar year less deferals made up to the PYE. Which in this case is 11,000 less 1,000 indicating that 10,000 can be made for the remainder of the calendar year. When the worksheets are completed for the next years test, this is causes a 401(g) failure of 1,000 w/ 326 in catch up still available which leaves a 402(g) refund due of the 624.00.

It seems to me that if the 624.00 was characterized as catch up contribution resulting from the prev year ADP failure that it should not be also counted as part of the elective deferrals in the calulation for determining the remaining amount of deferrals left in the calendar year.

It seems unfair that the 1000 deferred from 1/1/02 - 3/31/02 was characterized as elective deferrals, then ADP failure alloted them to be recharacterized as Catch-Up and remain in the plan, to then say that on the 402(g) testing that they are included as the elective deferrals made and excluded from the catch-up available for that year which results in a refund amount of 624.00???????

Your input please.

[Guest spritcha]

I'm interested in seeing any comments on this post. Is the checklist posted somewhere I can access it? Thanks

[Guest Gordy]

DC Sharp:

Ditto on the worksheet. I looked in Sal's 2003 guide and also in the NIPA text material from the 2/20/03 seminar and did not see it. Would appreciate access.

Thanks

Gordy

[Guest D C Sharp]

I attended an Erisa Update Seminar presented by Sal in June, 2002. At that seminar the binded handout included the worksheet that I referenced. I have since tried to locate the worksheet in Sal's 2003 Erisa Outline Book and the News letter write-up that he did on Catch-Up contributions but have been unsuccessful in locating the worksheet that was provided in the 2002 seminar.

I will still try to obtain a location for where this worksheet can be accessed.