Chippy Posted January 23, 2014 Posted January 23, 2014 One of my clients would like to put in 12,000 in deferrals, 5,500 in catch up and 39,000 as a profit sharing. Would that be allowed? I told them no, and then they wanted to see where that was written in stone. I couldn't find anything that specifically said that. Anyone know?
Lou S. Posted January 23, 2014 Posted January 23, 2014 Why can't he? We do stuff like that all the time.
BG5150 Posted January 23, 2014 Posted January 23, 2014 It's not considered a catchup until you hit a limit. So, you have $17,500 in 401(k). Note: not 12k & 5.5k. Are you over the base $17,500 (for 2013)? No. No catch-up yet. Are you over a plan-imposed limit? (ex. plan limits deferrals to 6% of pay, and person makes $100,000). No? No catch-up yet. Have you failed the ADP test and this person needs a refund? No? No catch-up yet. Are you over the 415 limit of $51,000 (for 2013) after profit sharing? (17,500 + 39,000 = 56,500) Yes! You can now re-characterize up to $5,500 as a catch-up. 401king and ETA Consulting LLC 2 QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
401king Posted January 23, 2014 Posted January 23, 2014 One of my clients would like to put in 12,000 in deferrals, 5,500 in catch up and 39,000 as a profit sharing. Would that be allowed? I told them no, and then they wanted to see where that was written in stone. I couldn't find anything that specifically said that. Anyone know? I believe he could put $51,000 as a profit sharing contribution, and a $5,500 catch-up on top of that. R. Alexander
ETA Consulting LLC Posted January 23, 2014 Posted January 23, 2014 One of my clients would like to put in 12,000 in deferrals, 5,500 in catch up and 39,000 as a profit sharing. Would that be allowed? I told them no, and then they wanted to see where that was written in stone. I couldn't find anything that specifically said that. Anyone know? I believe he could put $51,000 as a profit sharing contribution, and a $5,500 catch-up on top of that. I was just about to post the same comment. $51,000 would get him to the 415 limit, so a deferral of $5,500 would maximize his catch-up. Keep in mind, however, than he CANNOT have a $56,500 profit sharing contribution. In order to get above the 415 limit through catch-up, it must be a deferral. Recently, I had to remind several people of this. Good Luck! CPC, QPA, QKA, TGPC, ERPA
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