415 and fiscal limitation year

[DPL]

Can the same process used to ID catch-up contributions for an ADP test also be used for 415 if the plan has a fiscal year and the limitation year is the same? I am being told that the TAG question below only applies to the ADP test and not 415.

Question:

Is it OK to have 2 calendar year catch ups within a 7/31 plan year and not exceed the Section 415 limitation?

This plan has a 7/31/2006 year end. One of the participants in this plan deferred $18,000 from August through December 2005, and $20,000 January through July 2006 (including catch up contributions), for a total of $38,000 during the 2005/2006 plan year.

The participant in my example would have within the plan year:

$29,000 employee deferrals
9,000 catch up deferrals
15,000 discretionary contribution
$53,000 TOTAL

Is this permissible?

Answer:

Yes. This is a bit counter-intuitive, but example 6 from the final 414(v) regulations makes this clear. Well, clear considering it came from IRS. In example 6 (below), Participant E makes $600 in (402(g)) catch-ups from 11/1/05 - 12/31/05, and $1,000 between 1/1/06 - 10/31/06. The full $1,600 in catch up contributed during the 11/1/05 - 10/31/06 plan year are subtracted from Participant E's deferral in determining the ADP for PYE 10/31/06, but only $1,000 counts towards the 2006 catch up limit.

[Kevin C]

The Q&A you copied deals with the section 415 limit, so I don't understand the comment that it only applies to ADP and not 415. Can you be more specific about your question?

The determination of catch-up used to determine what deferrals are included in the ADP test is not exactly the same as the catch-up determination used in the 415 limit. See 1.414(v)-1(d)(1) & (2). Catch-ups triggered by statutory limits or employer-provided limits are not counted in the ADP test and are not annual additions under section 415. Catch-ups triggered by the ADP test count as deferrals in the ADP test, but they do not count as annual additions under section 415.

The timing rules of 1.414(v)-1©(3) determine the as of date for catch-ups triggered by the various limits and tests. The catch-up limit applies to the participant's taxable year. The catch-up contributions for a non-calendar year plan year are the catch-ups as of a date during that plan year. Depending on the timing, you can have two taxable years of catch-up happening in the same plan year.