CATCH UP & 415

[Guest Rutager]

Owner maked $41,000 in compensation for plan year. He is over age 50 & he puts $15,000 in 401(k) and $5,000 in catch-up contribution into plan.

He wants to maximize the amount he gets into profit sharing.

The 415 limit is $44,000 for the year. Can he get $21,000 in profit sharing or can he get $26,000 in profit sharing?

[WDIK]

According to Code Section 414(v)(3)(A), catchup contributions

"shall not, with respect to the year in which the contribution is made --

(i) be subject to any otherwise applicable limitation contained in sections 401(a)(30), 402(h), 403(b), 408, 415(c ), and 457(b)(2) (determined without regard to section 457(b)(3)), or

(ii) be taken into account in applying such limitations to other contributions or benefits under such plan or any other such plan"

[david rigby]

But don't forget to include it in subsequent years' TH testing.

[austin3515]

Since no one else answered your question, I'll take a shot: $26,000, calculated as:

Total Comp/415 limt: $41,000

Catch-up contributions: $5,000

Total adjusted 415 limit: $46,000

Less 401k contribs: $20,000

Leaves $26,000.

You can exceed 100% of pay by the catch-up amount.

[Jim Chad]

Austin covered the 415 limit, but I want to remind you to think of the limits on deductibility under Section 404. The short version of that rule is that the company's maximum deduction is 25% of the comp of all eligible employees plus all deferrals (including catchups).

[austin3515]

Damn good point...

[WDIK]

Since no one else answered your question

I guess that depends upon your perspective.