Plan Year/Limitation Year

[Guest JROSSITTER]

Plan year end is 7/31, limitation year is calendar year. Must the applicable limitation year be the calendar year in which the plan year ends (in which case you would not know the participants' comp for 415 purposes when contributionis made), or may the prior calendar year be used?

[Blinky the 3-eyed Fish]

The plan year would become irrelevant for determining if a 415 limit was violated or not. Because the limitation year is the calendar year, you are looking at compensation and annual additions within each calendar year.

By the way, why the plan was set up like this was probably to get the maximum limits for the 7/31/02 plan year. However, for that one year of bonus, you have many future years of potential headaches.