DB Limits

[Guest Pamela K]

Hello,

I'm trying to perform a pension calculation and I can't seem to find out if it is necessary to apply compensation limits. Please see below for the year and the compensation amount:

1983: 318,333.36

1984: 321,249.96

1985: 367,500.00

1986: 650,000.04

1987: 525,000.04

Please let me know if any limits should be applied to the compensation. Thank you!

[david rigby]

The currect IRC 401(a)(17) provision was effective for plan years beginning in 1989. Prior to that, there were limits that might affect top-heavy plans or shareholder-employees.

Any other information on the plan/employee in question?

[AndyH]

... and, whatever limits applied to a DB plan also applied to a DC plan as well; so if you have DC eligible compensation then that almost certainly would be DB compensation as well.

[mwyatt]

Also need to know at what point you were calculating the benefit in question due to various grandfathers due to:

1) (If applicable) $200,000 limit first applicable for 1984 plan year due to Top Heavy status.

2) End of 1988 year (if not top heavy) due to 1989 imposition of $200,000 limit to all plans.

3) End of 1993 year due to OBRA '93 lowered limit of $150,000.

Also don't want to even mention family aggregation (repealed in 1997).

So, to help you:

Was plan top heavy?

When are you calculating the accrued benefit (1988 grandfathering could be very critical to check if this plan was not top heavy given size of unrestricted salaries)?

To further complicate matters, in 2002 EGTRRA will (unlike past practice) allow you to increase prior year eligible compensation figures to $200,000.