Eligible for catch-ups?

[Guest KMP]

I have an off calendar year plan with a plan year ending 3/31/04. The owner turns 50 in August 2004. Can the owner go over the 415 limit by $3,000 since she is 50 during 2004, or since she turns 50 after the plan year ends, is the 415 limit still $41,000?

[Brian Gallagher]

Catchups in non-calendar year plans are always tricky. Heere is one thing to consider for one of your questions:

Catch-ups are NOT included in the 415 calculation so you are okay there.

[FundeK]

The participant is eligible to make catch up contributions for the 2004 calendar year since she will turn 50 in that year. Whether the plan treats the $ as catch-up will be determined at the end of the plan year. She can treat the $ as catch up for her own individual limits, and the plan may or may not treat it as catch up. If she exceeds a statutory limit, or a plan imposed limit by more than the catch up limit, you will have to correct.

[Lori Friedman]

If you haven't done so already, you'll want to review the plan document and make certain that it provides for over-50 catch-up contributions. A participant can't make catch-up deferrals to a plan that doesn't allow them.

The Sec. 415 limit, determined according to the plan's own limitation year, won't be a problem. Catch-up deferrals aren't treated as Sec. 415© annual additions to the participant's account balance.

The Sec. 401(a)(3) and Sec. 402(g) limits on elective deferrals are applied on the basis of the participant's tax year -- almost always the calendar year. An individual who's expected to reach age 50 before the end of his/her tax year is eligible to make a catch-up contribution.