Section 415 Limits Across Multiple DC Plans

[Guest browntrout]

An individual has self-employment income, but also works as an employee for a separate, unrelated company. The individual has set up a SEP to make contributions out of earned income from the self-employment business and also participates in the separate, unrelated company's 401(k) plan. In this situation, does the section 415©(1) limit apply to the individual or to each of the defined contribution plans?

In other words, does the $49,000 annual addition limit for 2010 apply to the SEP and the 401(k) separately (for maximum potential across both plans of $98,000) or is the individual limited to $49,000 in total (for both the SEP and the 401(k))?

I understand that the elective deferral limit of $16,500 applies across all DC plans, but I'm not sure if the section 415©(1) annual addition limit applies to each DC plan (regardless of how many plans in which an individual participates).

Any guidance would be greatly appreciated.

Best regards,

Bob

[Mike Preston]

If it is truly separate and unrelated, the employer based limitations are applied separately. There are some unusual circumstances that treat entities are related when no rational person would think that they should be, so best to confirm that with somebody who knows the rules.