EGTRA and the 415(c) limit

[stephen]

Under existing law the 415© limit applies to plan year's ending in that year:

For example in a plan with a 2/28/01 year end I have applied the $35,000 limit.

When will the $40,000 limit apply for this plan?

[MGB]

The intent was for the $40,000 to apply to limitation years ending in 2002. However, the language is not really clear on that. It will now fall in the hands of the IRS making a decision. The confusion is that the DB limit specifically references limitation years, whereas the DC does not. The reason the DB limit was done that way was because it originally was set up as a phase-in over multiple years. The words limitation year were added in conference to clarify that phase-in application. Once the numbers changed to be a one-time increase, the word "year" would have been sufficient, in my opinion (which is what the DC limit was worded as).

The single "years" reference (with no mention of limitation years) is similar to earlier law changes in 415 limits. Note that "limitation years" is not a concept in the law, it is only in regulations. The regulations say you can use the limitation in effect in the "year" that the limitation year ends. It is the year in quotes that the law refers to in its effective date. An argument could be made that this is no different than the CPI adjustments being effective in a "year," but may be used in the limitation year ending in that "year."