415 Suspense Account / Rev. Rul. 2001-51

[Guest lawkid]

A qualified plan has not been amended to incorporate the higher 415 allocation limits prescribed by EGTRRA. The plan sponsor does not intend to ever increase the 415 allocation limit. There are presently amounts being held in a 415 suspense account under the plan (attributable to excess contributions in prior years). If the plan had adopted the higher EGTRRA limits, the entire 415 suspense account balance could have been allocated to plan participants this year (2002). However, the plan's pre-EGTRRA 415 limit results in amounts having to remain in the suspense account. It is clear under Rev. Rul. 2001-51 (Q-14) that any future excess contributions to the plan that cannot be allocated because of the plan's pre-EGTRRA 415 limits may not be held in a suspense account going forward. Could the Rev. Rul. be interpreted to require allocation of the entire 415 suspense account balance in 2002, notwithstanding the fact that doing so would be contrary to the terms of the plan?

[jaemmons]

Amounts arising from pre-EGTRRA 415 excess, needed to be exhausted before any more contributions could be deposited into the plan. I am not exactly sure how you still have amounts in suspense due to pre-2002 limitation year violations.

[Guest lawkid]

Thank you for the reply.

I am aware of the general rule under Regs. Section 1.415-6(B)(6)(i)-(iii) that requires the allocation of 415 suspense account amounts before any additional employer contributions can be made. Unfortunately, however, the general rule does not answer the question.

The stock that currently resides in the 415 suspense account got there due to a number of errors (be it miscalculating employee compensation or a similar mistake) in the previous administration of the plan.

[Mike Preston]

The plan can not allocate the amounts if the plan is not amended. If the plan is not amended, the suspense account will be because of a plan provision other than 415. Hence, the plan will be disqualified. Amend the plan, or be prepared for a correction later under EPCRS.