Can a participant who is employed by 3 separate employers be involved

[Guest Don J. Smith]

A man has two unrelated jobs. At one he is fully funding via deferrals to a SIMPLE plan ($6,000). At a seperate jod and unrelated employer he is maxing out a 401(k)($10,500) in deferrals. He has no ownership in either of these 1st two businesses. In addition he is self employed and wants to know if he can set up a plan(s) and fully fund it/them.

1)My 1st question is, is what he is currently doing OK?

2)What would he be able to set up (in the DC arena) for his self employed entity and what max limits could he fund to?

[rcline46]

401(k) limit is 10,500 personally, totally. He cannot fund a SIMPLE to 6000 and 401(k) to 10,500. 401(k) must be cut back.

If all three are unrelated, he can get maximum $30000 / 25% of pay in each. It is 401(k) that is reduced.

[actuarysmith]

I agree with the last comment.

However, it is the participants responsibility (not the employers) to monitor his overall 401(k) limit. The unrelated employers have no way of knowing about each other.

Further, in some prototype documents it states that if the paricipant doesent let the employer know of the excess by a certain date, then the funds CANNOT come back out of the plan, but the participant must still pay the tax on the excess. (even though it does not come back out of the plan).

[Guest]

and, I would add, what happens, as a result, you could end up paying taxes twice on the excess deferral.

e.g. The year is 2000. when you send in your 1040 (March of 2001)you attach your W-2s.

One indicates deferrals of $6000 the other indicates $10500.

At this point, how are you going to hide the fact from the govt? White out just doesn't work.

You are required to pay taxes on the excess deferrals.

If the $ are left in the plan then at retirement when you withdraw the $ you pay taxes a second time.

[Guest Don J. Smith]

I was under the impression that if you funded a SIMPLE plan you could not fund a 401(k) with any amount. Although the fact about the employers being unrelated made the issue more complex.

So would it be possible to quit funding the 401(k), keep the SIMPLE with his one ER and set up a Profit Sharing Plan for his Sole Proprietorship?

[Guest bill mahoney]

As long as the company that has set up the SIMPLE IRA does not have any other plan then it is fine. For futher clarification go to IRS publication 560. The limit on no other plan is an employer limit not an employee limit.