Do amounts contributed as catch up contributions to a SIMPLE IRA affect the ability to make catch up contributions to the plan of another employer such as a 401(k) or 403(b)?

[Guest David Blask]

Do amounts contributed as catch up contributions to a SIMPLE IRA affect the ability to make catch up contributions to the plan of another employer such as a 401(k) or 403(b)?

[Gary Lesser]

Yes, but no amount is actually contributed "as" a catch-up contributions. By definition, a catch-up contributions is an elective contribution that exceeeds a statutory limit.

Except in the case of an eligible 457 plan, the annual limits for elective and catch up contributions are applied on a plan and on an individual basis. If the employers are unrelated, generally neither have to consider the existance of the other plan.

See instructions on the back of Copy C of Form W-2. The individual would have to report elective contributions or catch-up conbtributions in excess of the applicable limits on Form 1040, line 7.

Examples. (a) A non-HCE with lots of compensation makes a $12,000 elective contribution to 2 plans (nether of which are eligible 457 plans). $12,000 must be reported in gross income.

(b) Assume the individual IS an HCE and his elective ADP contribution was limited to $9,000. $2,000 would be a catch-up contribution under the plan; and there wd be an excess contributions of $13,000 ($12,000 + $1000 ($12,000 - $9,000 - $2,000)).

Hope this helps.

[Guest jashendo]

David --

(With due respect to Gary's answer, which I agree with), If I understand your question, the answer is "yes." The annual limit on exclusion of "catch up contributions" is a personal limitation (like the basic elective contribution limit) -- not an employer-based limitation (like, e.g., the 415 limitations). You cannot exclude from income an additional $2000 of "catch up contributions" made under each of several plans of multiple employers.

The plans' terms would not necessarily prohibit the contributions from being made, but, as Gary's answer points out, you would not be able to exclude the total amount from income.

[Thanks Joshendo for clarifying this-GSL.]