PS-Deferrals-Catchup in 2 plans

[Cynchbeast]

402(g) limit for 2008 is $46,000. If participant defers $15,500 to PS/401k combo, he can get up to an additional $30,500 Profit Sharing (assuming plan passes all required testing). It is our understanding that if he is over 50/eligible for catch-up, we can actually give him $35,500 and re-characterize $5,000 of his deferrals as catch-up. Results: $10,500 Deferrals + $30,500 PS + $5,000 Catch-Up.

Q: If instead of one combined plan, the sponsor has the 401(k) and PS as 2 separate plans, can the same thing still be done, or can we no longer use the catch-up in the 401(k) to increase the PS contribution?

[Jim Chad]

Since I read this yesterday, I have been thinking about where to look for a definitive answer. I have no idea.

FWIW Here is the way I would deal with this. When.... no I mean if the PS contribution is made, both plans fail 415. I don't want to think in terms of when, because when the payments were made is irrelevant (I think). So both plans are failing 415, fix one of them, either one.

[PensionPro]

402(g) limit for 2008 is $46,000. If participant defers $15,500 to PS/401k combo, he can get up to an additional $30,500 Profit Sharing (assuming plan passes all required testing). It is our understanding that if he is over 50/eligible for catch-up, we can actually give him $35,500 and re-characterize $5,000 of his deferrals as catch-up. Results: $10,500 Deferrals + $30,500 PS + $5,000 Catch-Up.

Q: If instead of one combined plan, the sponsor has the 401(k) and PS as 2 separate plans, can the same thing still be done, or can we no longer use the catch-up in the 401(k) to increase the PS contribution?

Yes, you can use catch-up in the 401(k) plan if you hit the 415 limit for the participant in the 2 separate plans as long as you do not use the catch up limit twice.

Special rules for an employer that sponsors multiple plans -- (1) General rule. For purposes of paragraph © of this section, all applicable employer plans, other than section 457 eligible governmental plans, maintained by the same employer are treated as one plan and all section 457 eligible governmental plans maintained by the same employer are treated as one plan. Thus, the total amount of catch-up contributions under all applicable employer plans of an employer (other than section 457 eligible governmental plans) is limited to the applicable dollar catch-up limit for the taxable year, and the total amount of catch-up contributions for all section 457 eligible governmental plans of an employer is limited to the applicable dollar catch-up limit for the taxable year. §1.414(v)-1(f).