Section 415(b)(1)(A) and EGTRRA

[Guest lisbetf]

An attorney for one of my plans is saying, and I quote, that "Generally, EGTRRA's increase in the maximum annual addition to $160,000 is an optional change."

I questioned her on the statement that this is an optional change. She misstates that she is referring to the maximum annual addition; she told me she is actually referring Section 415(B)(1)(A) .

Is this increase from 140,000 to 160,000 an option or a requirement? :confused:

[MGB]

As is so often quoted, "what does the plan say?"

If the plan had specific language describing the old limits, then it is an optional change to go to the new higher limits. (The IRS always allows you to impose lower limits than the legal maximum, which is what you would be doing by not amending.)

If the plan incorporates 415 by reference without spelling out the specific limits, then the plan automatically goes to the higher limits without an amendment. If the plan sponsor does not want to accept the higher limits, then it would be required to adopt an amendment rescinding the higher limits and impose a lower one.