Determination of catch-ups in an off calendar plan

[MR]

I'm looking for specific guidance on the determination of what deferrals can be characterized as catch-up contributions for an off calendar plan year. My specific example is this; An owner defers $1000 per month during 2003 and another $10,000 during the first 6 months of 2004. Its a 6-30-04 plan year and he has deferred a total of $16000. If the plan fails the test and the maximum he could have deferred is, say, $12,000, can I consider $4000 to be catch-ups? We can use $3000 as 2004 catch-ups for sure, but can I count $1000 as 2003 catch-ups? He didn't exceed the 402(g) limit in 2003, but are we allowed to re-charaterize due to the ADP failure? I've looked around for guidance, but have come up empty so far.

[R. Butler]

The catch up contribution is determined at the end of the plan year. You will find this rule in the final catch-up regs. It is my understanding that this means that the applicable catch-up limit is subject to the limits for the calendar year in which the plan year ends. In your situation the catch-up would be $3,000.

[MR]

Yeah. The more I look at it the more clear it is that I could only count some of the 2003 contributions as catch-ups if they exceeded the 2003 402(g) limit. I can only recharacterize up to the catch-up limit for the calendar year in which the plan year ends, as you say.

Thanks