EGTRRA increased 415 limit not available until 2003 for some plans

[Belgarath]

As we were discussing amendments for our clients, we realized that for BEGINNING OF YEAR defined contribution (money purchase, target) pension plans, the 100%/40,000 limit will not kick in until plan years beginning 2003. Here's how it works:

The BOY plan has a valuation date of 1-1-2002. It therefore uses a limitation year beginning 1-2-2001, and ending on the valuation date of 1-1-2002. Since 415 limits are actually for limitation years (which normally coincide with the plan year, but not always), the increased EGTRRA 415 limits for DC plan will be for LIMITATION years beginning after 12-31-01. If you look at the example above, for such BOY plans, the limitation year beginning after 12-31-01 will be 1-2-02, and will be applicable to the PLAN year beginning 1-1-2003. Be careful with your illustrations or what you tell clients on such plans.

The above scenario applies to DC plan only, as the DB plan limitation year date is for limitation years ENDING after 12-31-2001.