50+ catch-up questions

[Guest devonlucy]

I asked this question in another form a few weeks ago and didn't receive any response. Trying again but expressing the question another way:

50+ catch-up scenario-

Example: Plan maximum percent limit on pre-tax contributions is 30%, plan maximum percent limit on after-tax contributions is 30%, and plan maximum percent limit on combined pre-tax/after contributions is 30%. Eligible participant has eligible pay of $40000 for year and contributed 20% after-tax and 10% pre-tax, 10% 50+ catch-up all year.

In other words, at year end eligible participant’s contributions total:

$4000 pre-tax

$8000 after-tax

$4000 intended 50+ catch-up

Is the $4000 “intended” 50+catch-up accepted as 50+ catch-up?

This eligible participant did not reach the IRS pre-tax max ($14,000). Did he/she reach the plan maximum percent limit on pre-tax contributions?

If you interpret the plan maximum percent limit on pre-tax contributions as the stated limit (30%), then the answer would seem to be “No” and therefore the $4000 intended 50+catch-up presumably would be returned the eligible participant. Is that correct? Would seem to not be an administrative nightmare and not the spirit of the law.

If you interpret the plan maximum percent limit on pre-tax contributions as the resultant limit given the eligible participant’s after-tax contribution rate (30% total – 20% after-tax = 10%), the answer would seem to be “Yes” and therefore the $4000 intended 50+catch-up presumably would be accepted as 50+ catch-up.

I have never seen anything in writing related to guidance on this issue when plan includes pre and after.

Sorry if this question has been asked and answered thousands of times.

[g8r]

My vote is that it's a catch-up. One way to look at it - The limit on deferrals is 30% minus the after-tax contributions. On that basis, the limit was exceeded.

[Bird]

I agree. He exceeded an employer-provided limit, and that's one of the applicable limits under the regs that can make a contribution a catch-up.