Short Plan Year 415 Limitation

[Guest NPS Darren]

We have a plan with plan year of 10/01/08 to 09/30/09, the owner received $49,000 in total contributions. Now the plan has been restated to a calendar year with a short plan of 10/01/09 to 12/31/09. Client wants to make a Profit Sharing contribution for the short plan year. We used the 415 limitation for 2009 of $49,000 for the plan year ended 09/30/09.

can we allocate a pro rated 415 limit of $12,250 for the short plan year?

[Guest Sieve]

Yes. Pro rata determination of DC plan's Section 415 limitation in a short plan (limitation) year is required. (Treas. Reg. Sectin 1.415(j)-1(d)(2).)

[Guest NPS Darren]

Yes. Pro rata determination of DC plan's Section 415 limitation in a short plan (limitation) year is required. (Treas. Reg. Sectin 1.415(j)-1(d)(2).)

Would you happen to know if in this case were we already utilized the 2009 limitation of $49,000 for the plan year ended 09/30/09 and if we pro-rate a contribution in the amount of $12,250 for a short plan year 10/01/09 to 12/31/09 could we then allocate to the same participants a contribution of $49,000 for the plan year 01/01/2010 to 12/31/2010?

It just seems that this could be a problem.

[Guest Sieve]

A full allocation is permitted for the 2010 calendar year plan year. Why do you think there might be a problem?

Now, there may be some deduction issues that you have to deal with during this switch-over period, since the empoloyer taxable year is not changing (I assume)