Fiscal year 401K for LLC

[Guest TOM HANCOCK]

Fiscal year 10/31

Member defers a total of $2,000 in Nov & Dec 2003 - All catch-up under 402(g) limit.

Member defers $16,000 from 1/1/04 thru 10/31/04 - $13,000 reg deferral plus $3,000 catch-up. Makes no further deferrals in 2004.

Company contribution for member for the year end 10/31/04 is $28,000 to max the 415 limit.

Question - What is the proper amount to be reflected on the member's K-1 at 10/31/04 for deduction on their 2004 return?

Is it $46,000? If so can this generate an audit situation for the individual?

When are the catch-up contributions properly deductible by the individual - flow thru from plan year or is it based on the calendar year it was deferred?

[R. Butler]

Maybe I'm missing something, but the catch-up contribution is determined at the end of the year. The catch-up limit is the limit that is in effect for the calendar year in which the calendar year ends (in your situation 2004).

It seems to me that in this plan he has deferrals of $18,000, $3,000 of that is the 2004 catch up. There is no catch up for 2003. The maximum company contribution can be $26,000.

[K-t-F]

Some people misunderstand how the catchup works.

If during a calendar year a participant deferrs up to the current 402g limit, then they have not made a "Catchup" yet. If that same participant is eligible to make additional deferrals (because they are 50 or older) then the additional deferrals are considered "Catchup" deferrals. Keep within the catchup limit though!

[Guest TOM HANCOCK]

It is my understanding the 402(g) limit is a calendar year limit.

Assuming the member had deferred $12,000 prior to 10/31/03 his deferral of $2,000 from 11/01 - 12/31 2003 would be a catch-up contribution. So total deferrals in plan year 10/31/04 would be $18,000 of which $5,000 would be catch-up deferrals - excludable from inclusion for other testing purposes ( ie 415 max).

My confusion is when these catch-up contributions would be deductible by the individual when it is a fiscal plan year that includes two calendar year catch-ups in it. For the 10/31/04 year end of the LLC his total deferrals and employer contribution would be $46,000.

[R. Butler]

Ok I see what you are saying regarding the ctach-up contribution. I missed the part "all catch-up under the 402(g) limit". (Somehow though, only because I haven't seen this situation, it looks funny.)

Anyway all of the deferrals are deductible to the exent they relate to compensation paid for that fiscal year.