How do you determine the annual additions limit for paired retirement

[Guest Joe Vasko]

I have a client who has a calander year 401(k) plan and an off calander year (4/30)ESOP. How do I calculate the maximum annual additions limit and contribution under 415©(1)if the limitation years are different?

[Guest]

have fun on this one!

see section 4 of Rev Rul 79-5

(I get a headache just looking at it)

..."The annual additions in both plans must be tested for both the 4/30 and the 12/31 limitation years"

thus, if I understand it all:

1. ESOP 5/1/99 - 4/30/00 (contribution considered made on 4/30/00) plus any deferrals, matches, etc form 5/1/99 - 4/30/00. use comp 5/1/99 - 4/30/00

2. 401(k) any contributions from 1/1/00 - 12/31/00 plus the ESOP contribution 4/30/00. use comp from 1/1/00 - 12/31/00.

good luck!

[Guest Richard Loebl]

Tom understates the problem which will happen if you ever have a 415 violation in this situation. {I had a client who did.} Our eventual solution (after resolving the 415 excess) was to change the Limitation Year [but not PYE] of the non-401(k) plan to match the calendar year LY of the 401(k) plan. That change, and paying more careful attention, seem to have done the trick.