415 Limit Off-Calendar Plan Year

[12AX7]

Employer Sponsors ESOP and (k). For the plan year ending 6/30/13, a participant hit the 415 limit and some of this excess allocation attributed to salary deferral was recharacterized as a catch-up contribution for the 2013 tax year.

This participant has also deferred $23,000 for 2013, which means there is now an excess deferral for the 2013 tax year. Because the plan year ends 6/30, it seems the excess deferral would get distributed by 4/15/14, even though it's an off-calendar year? Or, is there another deadline for doing this?

[Tom Poje]

My notes say the deferral limit for 2013 is 17,500 and catch up is 5,500 for a total of 23,000.

am I missing something?

remember, in regards to excess deferrals, they are calendar year. you send in your tax forms to the IRS. they look at all your W-2s. they add up all the deferrals and they know whether you are over or not, regardless whether you report it. therefore the deadline is April 15 (no extensions)

this is why you could end up getting taxed twice if excess is not removed timely. once for the plan year when it was due, and then a second time when the distribution actually takes place if it is late.

[12AX7]

Maybe I'm not looking at it correctly. Let's say the participant has a $15,500 excess 415 allocation. If I attribute $5,500 of that to a catch-up for the plan year ending 6/30/13, would that not reduce the deferral the participant could make for the 2013 tax year to $17,500. Add that back to the $5,500 catch-up from the 415 excess and you get $23,000. Otherwise, it seems I would be attributing 2 catch-up amounts of $5,500 for the 2013 tax year.

[Kevin C]

Here is a previous discussion that addresses whether plan determined catch-ups can reduce the amount the participant can defer under 402(g) / 401(a)(30).

http://benefitslink.com/boards/index.php?/topic/52437-catch-up-and-off-plan-years/

FWIW, I still think the catch-up eligible participant can defer $23,000 for the calendar year under 402(g) regardless of what happens with the plan determined catch-ups. A 415 violation correction can still result in part of his deferrals being refunded to correct 415 under EPCRS if the 415 excess isn't fully corrected with the plan determined catch-ups.

In your case, you haven't provided enough information. What did he defer 1/1-6/30/13 and what did he defer from 7/1-12/31/13? What employer contributions were allocated on what dates? Any ADP failures? The timing of the contributions determines the date they are considered catch-ups.

With a fiscal year plan and proper timing on the deferrals, it is possible to have two $5,500 plan determined catch-ups in the same calendar year. An ADP or 415 triggered catch-up is determined on the last day of the plan year, in your case 6/30/2013. 402(g) triggered catch-ups happen in the calendar year after the $17,500 limit has been reached.

I've submitted calendar year and fiscal year catch-ups as a suggested topic for an ASPPA session, but apparently there is no interest. I think there is enough confusion about fiscal year catch-ups to make it a useful session.