Short Plan year - catch up?

[PFranckowiak]

Plan started 10/1/2012.

401(k)

415 limit is 50,000*3/12 =12500

Do they get to take the catch up on top of the 12500 for a total of 18000?

Haven't had one of these short plan years in awhile and want to make sure they don't exceed the 415 limit .

Thanks

Pat

[rcline46]

Why oh Why is there a 'short year' for the first plan year? This is very unusual. Effective date does not trigger a short year unless the plan is drafted badly.

[PFranckowiak]

Company just established. Cannot have plan before company started.

[rcline46]

Yes you can, and get a full year deduction.

[Tom Poje]

I vaguely recall years and years ago the IRS...ok, it was 1997 according to the ERISA Outline Book 1B24, #30 Q and A "the effective date could proceed the existance of the company"

the usual caveat, it is an opinion only and doesn;t necessarily represent an actual position, so who knows if that really carries any weight.

I think you are correct, the person is limited to 12,500 - anything above that is over the 415 limit, which could be treated as a catch up.

By the way, lets suppose this person was an HCE at a former job, deferred 4,500 and all of that was treated as a catch up due to a failed test.

Then what?

he would have deferred 4,500 (old plan- treated as a catch up) + 12500 new plan + 5500 catch up = total deferral = 22,500

everything I've seen in the regs says a catch up limit is plan by plan max of 5500 - not combined all plans of all employers. the only thing in the catch up rules is all plans of an employer are combined and capped at 5500.

402 g simply says you can get the max deferral 17000 plus the max catch up of 5500 in a given year.

so it looks like that would be possible.

[PFranckowiak]

Thanks for your help.

PF