Catch-up

[rlb64]

Can total contributions including catch-up exceed 415 compensation? For example, participant's compensation is $10k, receives $2k profit sharing in 2005, can he defer $10k?

[WDIK]

Catch-up contributions are not considered for purposes of the annual additions limit. However, I believe that the maximum catch-up contribution is the lesser of the applicable dollar amount ($4,000 for 2005) or the participant's compensation for the year reduced by other elective contributions made.

If I'm not mistaken, in your example, the contributions subject to the annual additions limit would be $10,000 consisting of $2,000 profit sharing and $8,000 deferrals. The maximum catch-up contribution would be $2,000, ($10,000 salary less $8,000 deferrals).

[Blinky the 3-eyed Fish]

I remember my grandma telling me you can't defer what you didn't make. Applying it to this situation, I believe it would be nearly impossible to defer more than $10,000 with only $10,000 in salary.

[WDIK]

But since $2,000 is attributable to profit sharing contributions, do you agree that total annual additions could exceed salary?

[Guest tas]

Hmmm... The 415 limit is the lesser of the annual dollar limit or 100% of comp. However, you can have catch up contributions to the extent that you have hit ANY plan limit. Catch up contribution cannot allow your deferrals to exceed your compensation (makes sense.. you must have comp in order to have a deferral of comp.).

Therefore, as long as the total deferrals do not exceed comp., I believe you can allow the PS contribution to exceed the comp. up to the catch up limit.

[wmyer]

See this link.

[david rigby]

If one earns $10K, but has 7.65% deducted for SS taxes, how does one have $10K left to defer?

[WDIK]

If one earns $10K, but has 7.65% deducted for SS taxes, how does one have $10K left to defer?

Two scenarios come to mind. The first requires an improbability drive, and the second involves rubbing a certain Arabian oil lamp.

(It seems I always run amok because of such pesky details.)