Michael A. Webb, Vice President, Retirement Services, Cammack LaRhette Consulting, answers:
Indeed, you are correct, and thanks for pointing out this distinction! (the Experts should mention that more than one astute reader raised this issue).
The age-50 catch-up is a “freebie” under Code Section 414(v), meaning it is not included as an annual addition for 415 limit purposes, nor is it included in any other contribution or nondiscrimination testing limit.
Thus, an individual who is at least age 50 at the end of a calendar year may always defer the catch-up amount ($5,500 in 2011) in that calendar year, if a) the plan permits the age-50 catch-up election (most do), and b) the employee is eligible to defer to the 403(b) (most are, since only limited classes of employees may be excluded from the right to make deferrals to a 403(b)).
However if the physician is our example was not 50 years of age or older as of 12/31/2011, the use of the age-50 catch-up would not be possible and no deferrals or other contributions would be permitted. This is due to the fact that the physician already contributed the 415 limit of $49,000 to her private practice plan, which exhausted her contribution limit for 2011 (see Ask the Experts – Contribution Limits in Dual Plans).
NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.