415 Limits

[Guest Hartnett123]

The employer wishes to make a 25% contribution to his Profit Sharing Plan.

There are 8 participants, 2 of whom have $200,000 in compensation. Because they are limited to a $40,000 contribution for 2003, or 20% of compensation, does this mean that in order to have a uniform allocation all participants must then be limited to receiving a 20% contribution?

Two of the other participants are HCEs by the way, but the 25% limit would not affect them.

[pmacduff]

No you don't have to reduce the others to 20%. You can discriminate against HCEs. If the Employer wants the full 25% deduction, you would just allocate the additional $ to the remaining employees uniformly (i.e. they will each receive >25%). You should also check the document to be sure there aren't any limitations other than the regs. Your document may also tell you if the excess is reallocated to all others or reduced. We use Relius and have to tell it whether an excess of Employer PS is reallocated or reduces the contribution. Hope this helps.

[david rigby]

pmacduff gave the most likely answer. Other variations are possible. Of course, the correct answer is contained in his suggestion to check the plan document.

[Guest Hartnett123]

Thanks!

[AndyH]

Or check with as-yet-unnamed super secret regional compliance coordinator.