150% of CL

[Dougsbpc]

I know this has been beaten to death, but my understanding is the following:

An employer may deduct up to 150% of UCL in its defined benefit plan for the plan year beginning 1/1/2006 even though it also maintains a 401(k) Profit Sharing plan. However, only salary deferrals were made to the 401(k) plan in 2006. Also, the DB has been in existence with all HCE's participating for over two years. Also, there has been no HCE benefit increase in the DB plan in the past two years.

Does the fact that the 401(k) plan contains profit sharing money from 5 years ago disqualify the DB from the 150% of UCL deduction?

[Andy the Actuary]

This is posed as an honest question and is not intended to be sarcastic: What in Notice 2007-28 suggests to you that there would be a lookback?

[John Feldt ERPA CPC QPA]

The way I read it, if contributions for the tax year are made to the 401(k) / PS plan which consist solely salary deferrals, then you may use the 150% of current liability limit for purposes of determining the maximum deductible amount for the DB plan for the same tax year.

[Andy the Actuary]

Notice 2007-28 reads "If elective deferrals are the only contributions under a defined contribution plan, then the plan is not taken into account in applying the limits of § 404(a)(7)." So, I believe your question is whether contributions refers to the current year's contributions or does this sentence mean the Plan has never accepted contributions other than 401(k) elective deferrals?

Since Q7 is referring to contributions during the current year, it is hoped that contributions refer to the current year since the latter answer frustrates the purpose of PPA2006. Of course, Q7-9 frustrate the purpose of PPA2006. 20 years ago there would have been no doubt to the answer. But, in this environment of the IRS taking actuarial license, it's a meaningful question, whether or not the broader definition is consistent with the intent of PPA2006.

In short, have no idea.

[John Feldt ERPA CPC QPA]

Okay, since we are dealing with the team of Holland et al, who knows what might really be meant. As Larry Deutsch has in his axiom #4:

"When I use a word, Humpty Dumpty said, in a rather scornful tone, it means just what I choose it to mean neither more nor less."

Lewis Carroll

Andy is right to pose the question, who knows how the IRS will use that word?

I choose to take that risk anyway, making my own reasonable interpretation, where the word reasonable means exactly what I want it to mean . I'll stand by my earlier post.