Includible Compensation

[Guest dietpepsi]

I've searched all the threads and didn't see any information about the change EGTRRA made to using "includible compensation" when calculating 415 limits. My EGTRRA book from RIA indicates that for purposes of determining the limits on contributions you must use includible compensation. If you look at old versions of the ERISA Outline Book or 403(B) Answer book they say to use 415 compensation but the updated version say to use includible compensation. I've checked a few 403(B) plan documents provided by several name brand providers in the 403(B) market, and although they claim their plans were updated for EGTRRA, they do not reference includible compensation for the calculation of 415 limits. Is it because this change is insignificant? What am I missing? Why isn't this an issue people have discussed?

Chuck, have you updated your software to take this into consideration?

Thanks!

[Guest Yanikoski]

Pre-EGTRRA, there was a different definition of includible compensation for purposes of the MEA rule (403(B)(2)) and the Section 415 limit. Now that the MEA is gone, there is only one definition for 403(B) plans, and the definition is in 415. But 415 now states that for 403(B) purposes ONLY, the 403(B) definition of includible compensation still applies, so the merry-go-round has gone full circle. For 403(B) plans, therefore, you do NOT use the regular 415 definition, therefore, just the 403(B) definition: which really the same as it was before. If the year being calculated has less than a full year of full-time service, you need to bring in enough compenation from preceding years to bring Includible Compensation up to one full-time-equivalent year, just like in the old days.

Since you ask, our software is fully updated for EGTRRA (also for the new RMD and even the brand new 72(t) regulations!!).

[Guest dietpepsi]

Thanks. I knew you could be counted on to have updated software. I may be in touch. We'll have to see what we can do in-house.