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Air Time Service Purchase - 415 Limit


Guest TroyRiley
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Guest TroyRiley

If a member who is purchasing "air time" under an installment payment plan terminates employment before completing payment for the service, does IRC Section 415 prohibit the member from continuing to make payments during years in which he is not an active member of the plan?

For example, the member agrees to make 5 annual installment payments, but he terminates employment after 2 years (only 2 payments made). Under 415©, annual contributions are limited to the lesser of 100% of plan compensation or $42,000. My thought is that because the member terminated employment and is no longer covered by the plan, his compensation is zero. Consequently, the inactive member can't make an annual contribution because of the 415 limitation. Thus, he can't complete his air time service purchase under the installment payment plan.

Any thoughts would be greatly appreciated.

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