Combined Plan Deduction Limits

[Gary]

Under PPA 2006 for the 2006 plan year. Plan has 2 participants.

My understanding for a single employer DB plan is that the 404 limit is u p to 150% of current liability.

My understanding for a DB plan and a stand alone 401k plan (no matches, etc.) is that the 150% current liability still applies.

My understanding for a combined profit sharing, DB plan situation, the combined plan DB limit is the minimum up to 100% current liability (if greater than 25% of pay) and that a profit sharing contributes 8% of pay, subjects 2% of pay to an excise tax for 2006.

Now here is where things get a little dicey for me.

If we have a combined profit sharing, DB plan situation, and between 1% and 6% is contributed to the profit sharing plan then is the plan DB limit:

the greater of minimum or 100% CL (assume greater than 25%) or

since profit sharing contribution does not exceed 6% is the combined DB plan limit ignored and the single employer limit of 150% of CL applicable?

Thanks.

[John Feldt ERPA CPC QPA]

Sorry, I don't think so.

Check out this post:

http://benefitslink.com/boards/index.php?s...=35028&st=0

[Andy the Actuary]

This particular issue was clarified by IRS Notice 2007-28 Q&A 9 which provides that the 100% rather than the 150% CL limit applies.

Under PPA 2006 for the 2006 plan year. Plan has 2 participants.

My understanding for a single employer DB plan is that the 404 limit is u p to 150% of current liability.

My understanding for a DB plan and a stand alone 401k plan (no matches, etc.) is that the 150% current liability still applies.

My understanding for a combined profit sharing, DB plan situation, the combined plan DB limit is the minimum up to 100% current liability (if greater than 25% of pay) and that a profit sharing contributes 8% of pay, subjects 2% of pay to an excise tax for 2006.

Now here is where things get a little dicey for me.

If we have a combined profit sharing, DB plan situation, and between 1% and 6% is contributed to the profit sharing plan then is the plan DB limit:

the greater of minimum or 100% CL (assume greater than 25%) or

since profit sharing contribution does not exceed 6% is the combined DB plan limit ignored and the single employer limit of 150% of CL applicable?

Thanks.

[Gary]

Yes, I am aware of Q-9.

In one sentence it says "When employer contributions do not exceed 6% ..., the combined limit of 404a7 does not apply to employer DC contributions"

So in playing devil's advocate if 404a7 does not apply perhaps we revert to single employer limit.

Maybe....

I certainly see your point that the limit is probably 100% CL.

To take a step back are we in agreement that if only 401k deferrals are made to a DC plan then the DB limit is the 150% limit?

So the thought was that perhaps paying less than 6% to DC swas analagous to 401k deferral only plan.

Thanks.

[david rigby]

BTW, in case you were not aware, the Academy sent this letter to IRS w/r/t Notice 2007-28:

http://www.actuary.org/pdf/pension/irs_0328.pdf

[Guest Guest_named_Howie Simon_*]

BTW, in case you were not aware, the Academy sent this letter to IRS w/r/t Notice 2007-28:

http://www.actuary.org/pdf/pension/irs_0328.pdf

ASPPA sent a letter to IRS yesterday and is posted to the website.

[John Feldt ERPA CPC QPA]

Kudos to ak2ary for working on that letter. Whoever helped to get ahold of Allen's comments to Grassley - again, great work!

http://www.asppa.org/pdf_files/0514_2007-27NoticeFIN.pdf