401(a)(17) & EGTRRA

[Guest Donkey Kong]

If a calendar year plan's document does not reference 401(a)(17) and the EGTRRA provisions as they relate the the compensation limit increases are not adopted, what is the compensation limit for 2002, $170,000 or $180,000?

[Mike Preston]

What kind of document doesn't reference 401(a)(17)?

[david rigby]

Generally, documents are not supposed to adopt IRC 401(a)(17) by reference. However, it certainly does happen.

You might get some value from these threads. In both, note comments by MGB.

http://benefitslink.com/boards/index.php?showtopic=14601

http://benefitslink.com/boards/index.php?showtopic=14370

[Guest death and taxes]

Perhaps Notice 2001-56 will provide you some comfort.

[david rigby]

There is sufficient ambiguity. However, see especially comments by MGB in the first link above and his reference to "as determined by the Commissioner." Excellent point. Under that perspective, the Commissioner never determined $180K, so it cannot be an indexed amount.

But you should be able to solve the confusion very easily by amending the plan to specify that amount (or any other amount not more than $200K). Might be cheap insurance to just do the amendment.

[Mike Preston]

While I agree with PAX that an amendment seems like the course of least resistance, in some respects, I can see how a plan sponsor might interpret the language of the plan, and the previously published methodology that is used by the Commissioner to determine the increases, to call for $180,000 in 2002. Any potential ambiguity in the plan can be resolved by the Plan Sponsor and this is a situation that if called upon in 2005 to review what somebody did in 2002 I would hope that using $180,000 would be ok.

[Tom Poje]

through the formula you would use $180,000,

but that is only through the formula, no adjustments were ever released. as I recall, non conforming states would operate under the old limits (e.g. 10,500 for deferral even though through the formula the limit would have been 11,000 anyway.) Based on that I guess I would be uncomfortable using 180,000 rather than 170,000.

[Mike Preston]

Tom, I strongly disagree. See prior message.

[mbozek]

The only way the a17 comp limit can be 180 for 2002 under pre EGTRRA law is if the IRS formally announced an increase from 170 to 180 k. I dont remember any IRS notice increasing this limit to 180K since the a17 limit was increased to 200 by statute but I have not paid attention to this change since clients have adopted the 200k limit. Why not avoid all this uncertainy and the waste of time that goes with it by increasing the comp limit to $180.