There is a possibility that your
employer-sponsored plan will need to be amended in order for you to make
catch-up contributions. If your plan has not yet made the amendment, the
IRS does provide model amendment language that can be used, but your
company should check with its legal counsel or plan administrator on what
your specific plan needs.
As a general rule, a plan should be amended
before allowing participants to make any catch-up contribution, but as
long as the plan is amended by the end of the plan year in which the
catch-up contributions are made, the plan should be able to demonstrate
good faith compliance.
The additional catch-up deferral amounts are as
follows:
|
2006 |
401(k), 403(b), SARSEP and
457 plans |
$5000 |
Simple plans |
$2500 |
IRAs |
$1000 |
As of now, the catch-up amounts listed above for
2006 will apply to all years thereafter as well. The catch-up
contribution is also limited by the excess of the participant's
compensation over the elective deferrals that are not catch-up
contributions.
The increases above
also do not apply to sec. 457 plans that are in the employee's last three
years before retirement. The sec. 457 plans already have an accelerated
tax-deferred contribution arrangement for these last three years under
sec. 457(b)(3).
These catch-up deferrals cannot be nondeductible
contributions If you have questions on these additional deferral
amounts or your own qualification to take them, please do not hesitate to
give us a call.
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