Catch Up Contributions

[Guest Michele Ciz]

Who exaclty is an "eligible" participant for catch up contributions? I know the participant has to be over the age of 50, and, I thought, the participant would have had to exceed the 402(g) limits, ADP Limit, or plan deferral limit.

In the following example, is this participant elgible to do cath-up contributions:

The plan is a 401(k) Profit Sharing - for 2008 the owner receives a profit sharing contribution of $46,000, and is over the age of 50. Can he also defer $5,000 as catch up contributions to reach the $51,000 limit?

[Bill Presson]

Who exaclty is an "eligible" participant for catch up contributions? I know the participant has to be over the age of 50, and, I thought, the participant would have had to exceed the 402(g) limits, ADP Limit, or plan deferral limit.

In the following example, is this participant elgible to do cath-up contributions:

The plan is a 401(k) Profit Sharing - for 2008 the owner receives a profit sharing contribution of $46,000, and is over the age of 50. Can he also defer $5,000 as catch up contributions to reach the $51,000 limit?

Correct.

[QDROphile]

Except that it is too late in 2009 to elect catch-up contributions for 2008. Catch-up will work only to preserve deferrals that were timely elected in 2008.

[Guest dobsonlaw]

Change the fact pattern a little:

If HCE's regular deferral limitation is 0% can they make a catch-up contribution? Are they considered to be "eligible to make elective deferrals" with a plan deferral limitation of 0%? This class is not excluded from a deferral contribution under the plan terms.

[Mike Preston]

QDROphile, as usual, is correct. It is too late to make an election at this point. However, if the election was made in 2008 and that election is given effect when the information regarding income for the year is determined (in the case of a sole proprietor or a partner in a partnership), it is certainly possible that a current $5,000 catchup contribution for this individual would be required/correct.

[Mike Preston]

dobsonlaw, that question has been around since the advent of catch-up contributions. The IRS refuses to provide a clear citation one way or the other (or, better I should say that they have provided clear cites one way *AND* the other, depending on when and whom one asked). It has therefore become a religious war. Some believe you can't do it. Others think that it fits squarely within the language of the Code and regs to allow it.

Is anybody aware of a specific cite on this issue that I'm not remembering?

[Kevin C]

The only cite I recall is the definition of catch-up eligible in 1.414(v)-1(g)(3).

(3) Catch-up eligible participant. --An employee is a catch-up eligible participant for a taxable year if --

(i) The employee is eligible to make elective deferrals under an applicable employer plan (without regard to section 414(v) or this section); and

(ii) The employee's 50th or higher birthday would occur before the end of the employee's taxable year.

[Guest dobsonlaw]

Kevin C.,

That gets us right back to the original question, doesn't it? Whew! Gotta love plan law!

Mike: You mention "clear cites". Could you point me to them? I've searched PLRs, Regs., a few of the publications I have here, but have found nothing concrete yet.

[masteff]

Try this thread, not specific cites but some good discussion (mainly on the 1st page): http://benefitslink.com/boards/index.php?showtopic=41319

[Guest dobsonlaw]

Thanks.