Discussion:Retirement contribution limits-multi unrelated employers
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Q1, and posts about how the employer limit applies only to each employer
Samaurai007 (talk|edits) said: | 14 March 2006 |
| I have a client (doctor) that worked for three different companies - one as an employee (not related or owner of company), another an S corp (15% owner) and the third from another (unrelated) LLC (less than 1% ownership). Individual is less than 40 years old and also have sole proprietorship with another $50k in net income that he wants to contribute max into for his own seperate retirement account.
All three have made contributions into their own retirement accounts for the benefit of my doctor client, and they all maxed out employee/employer contributions for their respective plans. Total contributions for my client from all three companies were approximately $112,000+ for 2005. Is contribution limited to $42,000 for employee from combined sources? None of the companies have any relation to each other except for this one common employee. Is the excess contribution subject to excess contribution penalty? To whom whould he give back excess contributions? If he returns excess to (employers?) by due date of the return, can penalty be avoided? What criteria should be used to determine which monies he returns to whom? Does this subject or expose all three companies to additional scrutiny and/or penalties even though they (or administrator of the plans) had no knowledge of other companies' contributions for this individual? | |
| 15 March 2006 | |
| If you are certain that none of the employers are related to one another or your client and none of the employers provide services to one another or together for other persons, then the 414(b) and 414(c) aggregation rules will not apply.
This means that your client gets a Sec. 415, $42,000 limitation for each employer. However, you need to verify that your client's elective deferrals are not more than $14,000 ($18,000 if over age 50). | |
| 15 March 2006 | |
| Riley2, I am glad to hear someone else say this. As I understand things, the $42,000 annual limit of 415(c) is applied to the plan, not the individual. 414(b) and (c) treat multiple plans of members of a controlled group as a single plan. Thus, if the multiple plans are operated by unrelated employers, the individual can receive multiple $42,000 contributions. However, as you pointed out, the elective deferal limitation of 402(g) is applied at the individual level. I have asked this question at CPE classes several times either to the instructor or to collegues and gotten the response that the limit applies at the individual level. | |
Q2
Www.cpa1.biz (talk|edits) said: | 7 August 2008 |
| Almanacers,
I am tryiing to understand something here and find out if there is another way to contribute more than the max to a SEP or Solo 401k. I am dealing with a client that has two companies (Ccorp and Sole Prop). Can they contribute to contribute the 46,000 SEP for the sole prop and 46,000 for the Ccorp under solo 401k. Since they have nothing to do with each other, this seems like it would be feasable. If it is not, what other ways can retirement play a picture (i.e. Annuities, other life insurance, etc.). | |
| August 7, 2008 | |
| What do you mean by "has" two companies? The self-employed individual owns the stock of the corporation?
What do you mean by "have nothing to do with each other?" If they really have nothing to do with each other, then, yes, the 415 limits aren't coordinated. | |
| 7 August 2008 | |
| Assuming that he owns more than 50% of the C corporation, he cannot contribute more than $46,000 in total. | |
Www.cpa1.biz (talk|edits) said: | 7 August 2008 |
| LH,
He is a sole prop and he owns a Ccorp as well. In tax terms, he files a schedule C and has to file C corp return for his company in which he is a 100% shareholder. | |
| August 7, 2008 | |
| Riley is correct, except that I'm not seeing why it's 50% and not 80% (after application of attribution), or lower if they're an affiliated service group. | |
| 8 August 2008 | |
| My mistake. 80% is the threshold for controlling interest. 50% is the threshold for effective control. Thus, in this case, since he owns at least 80% of the stock, the 414 aggregation rules will apply. | |
Q3, re affiliated service groups
Taxalmancer (talk|edits) said: | 12 February 2009 |
| "If you are certain that none of the employers are related to one another or your client and none of the employers provide services to one another or together for other persons, then the 414(b) and 414(c) aggregation rules will not apply."
Any suggestion what "together for other persons" means and how it is applied? | |
Taxalmancer (talk|edits) said: | 12 February 2009 |
| I think I located what I need. | |
Q4, Reg. 1.402(g)-2 to treat contributions over the individual limit as catch-up contributions
Kpangelinan (talk|edits) said: | 21 December 2010 |
| I got this from the 401k resource guide on the IRS website....can anyone comment on it comparing the prior posts on this thread?
Participation in plans of unrelated employers. If you participate in plans of different employers, you can treat amounts as catch-up contributions regardless of whether the individual plans permit those contributions. In this case, it is up to you to monitor your deferrals to make sure that they do not exceed the applicable limits. Example: If Joe Saver, who’s over 50, has only one employer and participates in that employer’s 401(k) plan, the plan would have to permit catch-up contributions before he could defer the maximum of $22,000 for 2010 (the $16,500 regular limit for 2010 plus the $5,500 catch-up limit for 2010). If the plan didn’t permit catch-up contributions, the most Joe could defer would be $16,500. However, if Joe participates in two 401(k) plans, each maintained by an unrelated employer, he can defer a total of $22,000 even if neither plan has catch-up provisions. Of course, Joe couldn’t defer more than $16,500 under either plan and he would be responsible for monitoring his own contributions. | |
Kpangelinan (talk|edits) said: | 21 December 2010 |
| I believe the info on the IRS site is correct, but I'm referring to the original question and the following posts say that you can max out your individual limitations for each unrelated employer and the IRS site I quoted says otherwise.
Is there anywhere else I can reference something saying you can contribute max limits for multiple unrelated companies? Thanks, | |
| December 21, 2010 | |
| As to the 415 limits, yes, see sec. 415 (including sec. 415(f), and read along with sec. 414).
As to the 402(g) limit, no, see sec. 402(g). | |
