Deducting After-Tax Contributions

[Guest 91smithie]

Do after-tax contributions count against the 25% limit (formerly 15%) under the defined contribution deduction limit rules of 404? Where does it say this?

[MGB]

No. The limit is on deductions, not contributions.

Prior to EGTRRA, the after-tax contributions would be used in applying the 25% individual annual addition limit under Section 415. However, that limit has changed to 100% now.

[Guest 91smithie]

O.k. -- to clarify then, if the total payroll was $1,000,000, the total deduction under 404 would be $250,000. Let's say employees made after-tax deferrals of $50,000 -- would the employer be able to make a $200,000 profit sharing plan contribution or a $250,000 profit sharing plan contribution and stay within the deduction limits?

[jpod]

The deduction limit is applicable to contribution by employers (although prior to EGTRRA, an employee's pre-tax 401k contribution was counted as an "employer contribution" for this purpose).

Your question implies that perhaps an after-tax contribution could be treated as an employer contribution, but I don't see how that would ever be possible. So, unless I'm missing something that's super-technical, the answer to your question is "$250,000."