401(a)(17) ($160,000) compensation cap and the 403(b)(2) exclusion all

[Guest mike webb]

Is "Includible compensation" for purposes of the 403(B)(2) exclusion allowance limited to the 401(a)(17) compensation cap (currently $160,000)? Example 20 of the updated IRS Examination Guidelines for 403(b)plans indicates that "Compensation" for 415 limit purposes is limited to $160,000, but is seemingly silent with regard to 403(B)(2).

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Mike W.

[Guest CVCalhoun]

This is a tough one! Under I.R.C. § 403(B)(12)(A)(i), the I.R.C. § 401(a)(17) compensation limit is applied in measuring discrimination. Thus, it would appear that using the larger amount of compensation to calculate the exclusion allowance, even if technically permitted, could easily result in nondiscrimination problems. This would be true even for governmental plans, which although exempt from most of I.R.C. § 403(B)(12)(A)(i) due to I.R.C. § 401(B)(5)(G), are not exempt from I.R.C. § 401(a)(17).

However, in looking at a salary-reduction-only plan, nothing appears to require that I.R.C. § 401(a)(17) be followed in measuring compensation for maximum exclusion allowance purposes.

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[Note: This message has been edited by CVCalhoun]