HCE catch up and IRA contributions

[jmartin]

Facts

- Plans can be amended to permit HCE's to contribute $0 deferral. Anything over that would be immediately re-classified as catchup (for those over 50). ADP test would be zero.

- If a HCE does not contribute to a 401k plan (or contribute $0), they could potentially contribute to an IRA (assuming other requirements met)

- If a HCE does contribute to a 401k plan (or contributes greater than $0) they cannot contribute to an IRA

- If a plan has poor NHCE participation and low NHCE adp %, HCE's may be better off contributing to an IRA

Question

- In a plan where HCE's are limited to $0 (anything over is catchup up to 5500), can a HCE contribute 5,500 and also to an IRA? The 5,500 is classified as catchup and therefore not really counted towards ADP, 415limit, etc. If they can do both you would be looking at a 11k plus contribute (IRA plus catchup)...even more if spouse can do an IRA...

[Bird]

So you're thinking that if someone only makes catch-up contributions they are "not covered" by a plan for IRA purposes? Interesting thought, but I don't think it flies. I'm pretty sure that the allocation of any contribution at all is sufficient to be "covered."

[jevd]

So you're thinking that if someone only makes catch-up contributions they are "not covered" by a plan for IRA purposes? Interesting thought, but I don't think it flies. I'm pretty sure that the allocation of any contribution at all is sufficient to be "covered."

IRA Contribution is still allowed. Deduction may or may not be depending on AGI.