Brain fart - Catch-ups

[No Name]

Have a 50+ (9/30/05 fiscal) client that wants to max the PS contribution. Deferred $17,950. Can I calc the contrib so that he gets $45,000, or would only #3,950 be considered a catch up?

[Leopurrd]

Couldnt you actually go to 46000 with the full catch up? I thought the annual limit was determined on the last day of the determination year, not the first?

Also -you can use the entire catch up available to max out; the 402g limit would be the first determination of catch up, the 415 limit would determine the additional catch up.

We use Relius and it determines the catch up automatically, so forgive me for not explaining in more detail; but i do know it can be done with the recharacterization rules in my second paragraph!

I'm assuming, of course, that all deferrals were made in the 2005 calendar year. Otherwise you'd be in a sticky situation determining catch ups for each year!!!

If he does max out, just a reminder that next years admin you could not use any of 2005's catch up in your contribution calcs.

Hope this helps!

Vicki

[Bird]

I think we'd need to know how much of the deferral was calendar and how much was fiscal...I'm not sure that I'd be able to figure it out, but that's required information.

Leopurrd's right that the limit is $46,000. And, yes, you could simply start with $46,000, subtract the fiscal year deferrals, and get your PS contribution.

[No Name]

Nice "catch" leopurrd on the $45/$46k limit. Question remains, if you didn't defer an extra $4k ( 2005), do you get $46K or something less?

[Bird]

Question remains, if you didn't defer an extra $4k ( 2005), do you get $46K or something less?

Not really (that is, the question doesn't remain since I answered it in my last post).

Anyway, it depends on what you mean by "extra." Catchups aren't defined as such unless/until you exceed a limit; could be 402(g), could be 415, could be a testing limit.

If we assume that the participant deferred $17,950 in calendar 2005, then we know for sure that $3,950 is catchup because it exceeds the $14,000 limit by that amount. If the business then makes a profit sharing contribution of $28,050 (which just happens to be 46000-17950), then another $50 becomes catchup because otherwise the contributions not already determined to be catchup exceed $42,000 by $50 (28050+14000=42050).

If fiscal deferrals are $17,950, but calendar 2005 deferrals are something less, say $10,000, then the business can contribute $36,000, and $4,000 will become catchup since the total contribution exceeds $42,000 by $4,000. If there are other participants this may of course affect their contributions. But the bottom line is that you only need $4,000 of deferrals in order to create a maximized catchup situation (just do a 4000 deferral and a 42000 PS).