2004 Annual Addition

[Lame Duck]

We are wrestling with the Annual Addition applicable to plan years ending January 31, 2004. EGTRRA amended Code Section 415(d)(1) to provide that the Secretary shall adjust annually "© the $40,000 amount in subsection ©(1)(A), for increases in the cost-of-living in accordance with regulations prescribed by the Secretary." This amendment was effective for plan years beginning after December 31, 2001. Regulation Section 1.415-6(a)(2) provides that adjustments to the dollar limitation "is effective as of January 1 of each calendar year and aplpies to limitation years that end during the calendar year." Do we use $40,000 as the Code seems to specify or $41,000 as the regulations specify? Any help will be appreciated.

[Brian Gallagher]

From the IRS website:

The limitation for defined contribution plans under section 415©(1)(A) is increased from $40,000 to $41,000.

the page is http://www.irs.gov/newsroom/article/0,,id=114714,00.html

...bg

[Guest mkimball]

It is based on the limit for the calendar year within which the limitation year ends. The plan document defines the limitation year.