415 limit with 2 businesses

[betheeg]

I have a client who dissloved a business (corp) midway thru 2005. He then established a new business (sole prop) in another state. He had a profit sharing plan for the old business. He established a new plan for the new business. He is the sole owner of both. Can he maximize to the 415 under both? My initial thinking is no, but wanted to be sure.

Thanks for any help.

[E as in ERISA]

You would generally have one 415 limit across businesses in which there was than a 50% interest in common.

[Ron Snyder]

E is correct. However, if the 2 businesses do not overlap in time so that they never were a controlled group or affiliated service group, it appears that 2 415 limits are possible. For example, if business #1 closed down in 1998 and business #2 did not come into existence until 2004 they apparently would not fall under the rules. This appears to be an (unintentional?) loophole that could be fixed by Regs.

[E as in ERISA]

But how would you get two 415 limits in that case with no compensation from #1 in 2004? I'm assuming you've had some situation where you think that applies, but can't think of it off the top of my head?

[Ron Snyder]

Since the original question dealt with DC plans, no doubling up of annual additions is permitted as you correctly stated.

The situation I described relates to DB plans. Corp. #1 funds 100% of salary benefit over a 10 year period and closes down. A few years later Corp. #2 opens up and funds a new DB benefit. Corp #2 enjoys a new 415 limit, since is was never part of a controlled group or affiliated service group with Corp. #1.

[betheeg]

Thank you both for your thoughts.

~Beth