Catch-up reclassification

[MoShawn]

I've seen other topics like this on this board, but I think they all dealt with deferrals permitted for the remainder of the calendar year. My circumstances are a little different.

11/30 Plan year end

No catch-up contributions for 2006 as of 11/30/06 or 12/31/06 (i.e. not over 402(g) or 415 limits, and no reclassed ADP refunds at 11/30/06).

Participant defers $692 in December 2006.

Participant defers $19,847 between 1/1/07 and 11/30/07.

Total deferrals of $20,539, of which $4,347 is reclassified as 2007 catch-up (402(g)).

Plan fails ADP Testing for 11/30/07.

Required refund for this participant is $1,148.

Remaining catch-up for 2007 is $653, leaving a refund amount of $495.

Can I reclassify $495 of the $692 deferred in 12/06 as catch-up as a result of the failed ADP Test at 11/30/07?

[CTipper]

That part's easy. Yes. You're over some sort of limit -- either the base 402(g) limit or some limit imposed by a test. In this case it's your failing 401(k) test.

My question is -- do you get to use the $692 from 2006 as part of that year's catch up?

Was the employee 50 in 2006?

Did they use any catch up for the 11/30/2006 plan year end?

Christopher

[Mike Preston]

No can do.

[buckaroo]

The answer is you cannot use the 2006 catch-up for a PYE 11/30/2007 test. The 2006 catch-up could have been used for some failure of the 11/30/2006 PYE testing (415, ADP, Plan Limit, etc...) or the 401(a)30 limit (or 402(g) limit) for 12/31/2006. Once these tests/limits have been reviewed and completed, you no longer have the ability to use the catch-up contribution for 2006. It is a "use it or lose it".

Now you are running the 11/30/2007, you have reclassified 4347 for the 401(a)30 limit failure and you now have 653 remaining. You ran the ADP and failed with a refund amount of 1148. Of that amount 653 can be reclassified, but the remaining 495 must be refunded.

Sorry, your cannot go back.