Over Contribution

[Guest PAUL DUGAN]

I just found out that a client with both a Profit Sharing Plan and a Defined Benefit Plan has made Profit Sharing contributions so far this year that are aprox 8% to 9% of payroll for the year. The DB minimum contribution is well in over the 25% limit for the combined plans.

It is not my PS document and I can find nothing in it regarding refunds on account of error.

My question is what happens to the excess?

Is deductible next year?

Is it allocated this year?

Are there any qualification problems.

[JanetM]

PPA of 2006 changed the combined limit. For 2006 and 2007 you can fully fund DB and still do 6% to DC. In 2008 the limit goes away completely. DC will be limited to the 25% of payroll and DB doesn't enter the equation any more.

[Guest PAUL DUGAN]

Thank you for your reply. However my problem is 2007

[Mike Preston]

Janet, keep in mind that the 404a7 restriction goes away in 2008 only for DB plans covered by PBGC.

[Mike Preston]

Paul, yes, yes, no. I think.