Catch ups, 415, and Off Calendar

[Gilmore]

Plan year end is 10/31.

In the calendar year ending 2018 the participant makes deferrals of $24,500. 

Deferrals from 11/1/2018 to 12/31/2018 are $4655 all 2018 catch ups, used in the 10/31/2019 plan year.

Participant defers $20245 from 1/1/2019 to 10/31/2019, with catch up of $1245 for 2019.

For the plan year ending 10/31/2019, I believe I need to consider $5900 as catch up for the plan year.

Considering the $56,000 415 limit, with the $5900 that are considered as catch up for the plan year, am I permitted to allocate a profit sharing contribution for this participant of $37,400?  That is the total plan deferrals of $24,500, plus the profit sharing of $37,400 for a total addition for the plan year of $61,900, which is $5900 over the 415 limit for the plan year.

Could the participant then defer the additional $4755 from 11/1/2019 to 12/31/2019, which would then be catch for the 10/31/2020 plan year?

Thanks very much!

 

[Lou S.]

The deferrals from 11/1/2018 - 12/31/2018 are all 2018 catch-up contributions due to exceeding the 2018 402(g) limit as stated above. As such you can ignore them for the PYE 10/31/2019 for all testing and limitation purposes.

The 415(c) limit for limitation years ending 2019 is $56,000 and the catch-up limit for 2019 is $6,000.

He has already used $1,245 of the catch-up limit in 2019 for exceeding the 2019 402(g) limit and and has $4,755 remaining in catch-up for calendar 2019.

So you currently have ($56K limit - $19K deferral) = $37,000. 

If he receives a PS contrib of $37K or less you are done - assuming you pass all non-discrimination tests. Under this scenario all deferrals from 11/1/19 - 12/31/19 would be catch-up contributions for 2019 (assuming you don't exceed the $25,000 total limit for 2019) and these would again be ignored in the PYE 10/31/2020 testing.

On the other hand, he can receive a PS contrib of $41,755 and  deferrals $4,755 would  be recaharterized as catch-up in 2019 in PYE 10/31/2019 due to exceed the Plan's 415(c) limitation. Under this scenario all deferrals from from 11/1/19 - 12/31/19 would  NOT be catch-up contributions for 2019 (assuming you don't exceed the $25,000 total limit for 2019) and these would be included in the ADP and 415(c) limit for the PYE 10/31/2020 testing.

I'm assuming limitation year = plan year in your document.

Have I said before how much I dislike off calendar year 401(k) plans?

[Gilmore]

Hey, thanks Lou.  Yes the off calendar plans keep you on your toes.  The question was prompted by a change in our admin system which I found out is not handling catch ups properly under these circumstances.  I appreciate the detailed confirmation.