Off-calendar plan year

[Guest Sieve]

What am I missing . . .?

Dr. with 6/30 pye adds a SH 401(k) to his straight PSP at the start of the plan year, 7/1/2010. For the rest of calendar year 2010, he defers $22,000 (he's over 50). Then, in the first half of 2011 he does the same. So, for the plan year, he has deferred $44,000, and only needs another $10,500 (using current numbers) to reach the 415 limitation--that's only 1.3% of compensation above the 3% safe harbor contribution (i.e., about 4.3% of his $245,000 compensation). So, he'll only have to contribute 4.3% of compensation for his staff for that plan year. A pretty cheap way to his 415 limitation. That's right, right?

And, if the PS side of the plan is integrated, he can get himself the 1.3% above the SH contribution by making less than a 1.3% integrated contribution (i.e., about 0.8% of total comp. + .8% of comp above the wage base, thus just .8% of staff compensation more than the 3% SH contribution). Right?

The next plan year, of course, he'll only be able to defer $22,000.

[rcline46]

You are correct.

[austin3515]

http://benefitslink.com/boards/index.php?showtopic=45053

Take a look at this thread where it was concluded (at least by me) that you can go up to $60,000 in additions because catch-ups are "DISREGARDED as 415 additions." And what you have here is $11,000 of catch-ups. I was very excited (in a pension geel sort of way) about this post as you seem to be on account of the fact that it is a fabulous year 1 plan design.

[Guest Sieve]

Don't know how I missed that earlier thread...must have actually been doing work...

So, you're saying that in the 1st year there can be a 415 limitation of:

• $44,000 of deferrals, plus
  
• $5,000 PS contribution, plus
  
• $11,000 catch-up,
  

for a total allocation of $60,000 ($11,000 of which does not count towards 415 since it's catch-up). And, integration makes the cost for staff even less than 5000/245,000 X staff comp.

Better than I thought!!

[Kevin C]

The $44,000 in deferrals already includes the $11,000 catch-up. You will need $16,000 in PS, not $5,000.

[Guest Sieve]

Oops! Thanks for the catch (numbers obviously not being my strength).

[TLGeer]

I've done this, and survived audit.