Participant in more than one plan issues...

[chris]

Person is employed by two unrelated employers and potentially will be a participant in each employer's retirement plans (possibly PSP and 401(k)). It appears that the 415 limit and the catch-up contributions limit( see example in Sal Tripodi's ERISA Outline Book at 11.257 regarding situation where catch-up limit is exceeded where individual is participant in two separate 401(k) plans maintained by two unrelated employers where failed ADP results in refund of deferrals) are plan limits and the 402(g) limit on elective deferrals is the only individual limit. Thus, assuming sufficient compensation from each employer, it would be possible for a participant in two unrelated employers' PSP/401(k) plans to receive 40,000 in the PSP(Employer 1) and 42,000 (28,000 PSP contribution, 12,000 deferral, and 2,000 catch-up) in the 401(k)(Employer 2)???

[R. Butler]

I agree with your ultimate conclusion, but I disagree that the catch-up contribution is a plan limit similar to 415. I am fairly certain that catch-up contribution is an individual limit.

[Appleby]

I agree with Butler

[chris]

I tend to agree with both of you as to the catch-up, but I happened to run across Sal Tripodi's example referenced above where a participant in two unrelated 401(k)'s received catch-up contirbutions in both plans b/c of failed ADP tests. In Sal's example, the combined catch-up's from both plans exceeded the limit, but Sal mentions that it is a plan limit and not a participant limit.....?? On Sal's rationale, a participant could exceed the deferral limit in each 401(k) (assuming unrelated e/ers) by 2,000 and have each of them qualify as a catch-up contribution....... Thanks for the replies.

[Appleby]

On Sal's rationale, a participant could exceed the deferral limit in each 401(k) (assuming unrelated e/ers) by 2,000 and have each of them qualify as a catch-up contribution.......  Thanks for the replies.

I see …Here’s my 2-cents….there are two limits to consider here. The plan limit and the individual limit ...Yes an individual may make catch-up contributions to each plan for $2,000. In this case, the catch-up is subject to the plan limit. However, the individual limit must be considered…and regardless of the number of catch-up contributions made to each plan, the aggregate salary deferral for the individual cannot exceed $14,000 for 2003 ($12,000+ $2,000). By plan standards, the $2,000 will be classified as a ‘catch-up’, but by federal standards, the amount will not be considered catch-up unless it exceeds the 402(g) limit of $12,000

[R. Butler]

Out of curiosity I reviewed my 2002 ERISA Outline Book. It seems to me that Sal is saying that in 2003 an individual over 50 can only defer $14,000. Thats what I was referring too.

Sal does does go onto provide examples of a participant in two plans that is required refunds from both plans. He states that each plan can apply the catch-up limit separately for purposes of determining refunds. I didn't consider that possibility, but it does make sense.

Still in no example, at least in the 2002 edition, does Sal say an over 50 person can exceed $14,000 in acalendar year.

[R. Butler]

I lokks like Appleby beat me to the punch by about 30 seconds.

[mbozek]

The over 50 catch up is a additional amount above the 402(g) limit permitted per participant. Thus the 2003 maximum salary reduction for a participant in one or more 401(k), 403(b) and SAR-SEPs is $14,000. However, a public employee can defer an addtional $14,000 in a 457(b) plan maintained by his employer.

[chris]

Reg §1.414(v)-1©(1) appears to state that the catch-up limit is an individual limit. The last part of that paragraph directs you to a different section of the Regs. as to multiple plans maintained by the same employer......

[david rigby]

Perhaps we can suggest that Sal write some of the regs.

[GBurns]

Are you saying that Sal (or the above cite from Sal) is contrary or in conflict with the Regs? If so where and how?

[R. Butler]

Are you saying that Sal (or the above cite from Sal) is contrary or in conflict with the Regs? If so where and how?

If he is in conflict then Sal is right & the regs are wrong.

[Appleby]

Are you saying that Sal (or the above cite from Sal) is contrary or in conflict with the Regs? If so where and how?

I don’t think anyone is saying that. I think Sal is right and Sal’s explanation agrees with the regs. It appears that this is just one of these things that require rereading several times in order to understand it…at least for people like me

[mbozek]

Under reg. 1.402(g)-2(a), the salary reduction dollar limit for a catch up eligible participant shall be increased by the applicable catch up limit set forth in reg. 1.414(v)-1©(2), e.g. $2,000 in 2003. Since all salary reduction contributions to tax deferred plans under 401(k), 403(b) and SAR-SEPs must be aggregated there is only one catch up limit per participant. The multiple plans exception allows a participant to treat aggregate contributions made to two or more plans as catch up eligible contributions even though the contributions in each plan do not exceed the 402(g) maximum. E.g., 50 year old particpant contributes $6,000 to plan 1 and $8,000 to plan 2 in 2003. Participant is deemed to contribute $12,000 under 402(g) limit and $2000 under catch up limit even though neither plan treated elective deferrals as catch up eligible. reg.1.402(g)-2(b).

[GBurns]

Appleby,

This subject is not an area of expertise for me so I have reread so that I understand what each person posts, However, rereading still did not help me understand the point that pax was trying to make by suggesting that Sal write some of the Regs. I could only come to the conclusion that he (pax) was implying that Sal was wrong but he did not state where or how and I could not see the rationale or relevance of his statement and wondered if I had missed something.

[david rigby]

No. My comment was an observation that Sal is held in high regard by many who contribute to these Message Boards. No disrespect intended to any.