404(a)(7) Again

[AndyH]

Now that the Jim Holland issue is resolved, I am still stuck on the 6% issue.

Is a DB of 21% and a PS of 10% entirely deductible or must the DC be limited to 6% if the combination exceeds 25%?

(Context is 2007 and a non-PBGC covered plan)

[ak2ary]

I believe that, assuming the same covered employees in both plans, the entire contribution is deductible. That is, only the amounts in excess of 6% of pay from the DC plan will be counted toward the 404(a)(7) limit

[AndyH]

Thank you.

[tymesup]

I don't see a way the limitation is ever less than 31%.

If there's no DC, you get the DB minimum.

If the DC is under 6%, you get the DB minimum.

If the DC is 6% or more, you get 31%.

[Mike Preston]

Sometimes there are folks participating in one but not the other.

[AndyH]

Good point Mike.

Anybody willing to tangle with an extension of this to the maximum? Just extending this discussion a bit, if the DC is 6% then the deduction limit is

Greater of:

6% plus 150% of projected unfunded CL

or

DB maximum under 404 plus 6%.

But if the DC is 7% then the deduction limit is

Greater of

6% plus 100% of projected unfunded CL

or

DB maximum under 404 plus 6%.

Right?

And in 2008, does the new CL replace the old CL and the DB 404 go away?