Off Calendar Plan Year

[MBCarey]

We have a plan with a plan year that begins 10/1/2003 and ends 9/30/2004. I know when testing them that I use the compensation for this period, but when telling them what the max. deferral amount, catch-up and compensation can be am I right in using the figures for 2003 since it is technically a 2003 plan year?

[Brian Gallagher]

By the "max", I'm guessing you mean the 402(g) limit. That is a calendar year limit, independent of what the plan year may be.

So, in theory, a plan year beginning 10/03, ending 9/04, someone could possibly put in $25,000 in elective deferral (exclusive of catch-up even).

That would be achieved thusly: put in $12,000 between Oct and Dec 03 (402g for '03 reached) and $13,000 between Jan and Sep 04 (402g for 04). That would, of course, mean that the person couldn't have had any deferrals between Jan and Sep 03, etc.

Catchups are calendar year also, so an add'l $2000 could have been made in 03 and $3000 can be made overall in 04.

However, if the plan fails the ADP test, the corrections get a bit hairy and are way over my head...

Hope this helps a bit.

[Blinky the 3-eyed Fish]

To get to the one last point of your question, the compensation to be considered is based on the 401(a)(17) limit for compensation period that begins in the calendar year. If your compensation period is the plan year, then that limit is $200,000 (of course, assuming the EGTRRA amendment increased the limit).

[jquazza]

For contributions recharacterized as catch-up due to an ADP test failure, you will actually look at the catch-up limit for the calendar year in which the plan year ends (in your case 2004.)