Employee in Two Plans

[DP]

I have a client who was a 33% owner in a medical practice with a 6/30 year end. For the 6/30/03 plan year, he received a $40,000 PS contribution.

He terminated his employment on 6/30/03 and started his own medical practice where he owns 100% of the stock. He opened a new PS plan effective 7/1/03 with a 12/31 year end.

Since he has already received a $40,000 contribution in 2003 from his previous employer, can he get a PS contribution from his new practice in 2003?

Thanks!

[four01kman]

The quick answer is yes. The $40,000 annual addition limit is an individual plan limit. Therefore, the defined contribution plans of the old employer and the new corporation could both credit the doctor with an annual addition of $40,000.

[Blinky the 3-eyed Fish]

I vote for I don't know the answer because it depends on your document. 401k is right that there appears to not be a related employer issue so the prior medical practice won't affect the current plan. However, you do have a short plan year and the document often defines the limitation year as the plan year. Thus, the $40,000 annual addition limitation would be pro rated if that were the case.

Go forth and amend if necessary!