Deductibility of contributions to both DB and DC plans

[Alan Simpson]

I need clarification on the deductibility of contributions by the employer to both a DB and DC plan.

I have heard that if an employer has both types of plans in place their deductible contribution is limited to the greater of the DB plan required contribution or $40,000.

In other words although 415 was repealed as far as individual limits are concerned, the employer may not be able to deduct the full contributions made to both plans. Is this correct?

The repeal of 415 made the individual participant limit go away but have the appropriate changes been made for the deductibility side?

[david rigby]

415 was not repealed; subsection 415(e) was repealed, but this impacts only the benefits under one or both plans. Deductibility is governed by IRC 404. $40,000 is the section 415© limit on the DC plan annual addition for 2002 (ignoring future indexing and "catch-up" contributions).

You are probably referring to section 404(a)(7). The maximum deductible is limited to the greater of the IRC section 412 minimum for the DB plan or 25% of compensation. Thus, it is possible that the employer may not be able to deduct all contributions. If that situation arises, the next question usually involves carryover, rather than permanently losing a deduction.