DB/DC Combination Contribution Limit

[emmetttrudy]

One man DB Plan also with a 401(k) Profit Sharing Plan. Compensation is greater than $230,000. His minimum required contribution for the DB plan is $0. The maximum deductible contribution is $73,152.

If I understand correctly the total contributions he would be able to make for 2008 is the sum of:

(1) Minimum DB contribution = $0

(2) 401(k) deferrals = $20,500 (including catch-up)

(3) 6% of comp for profit sharing = $13,800

Now, he is also subject to the greater of the above and the 25% limit (deferrals dont count towards this), correct? So 25% of his compensation is $57,500. Is this the maximum he can contribute and deduct for 2008 in the DB and DC plans combined? So if he contributed $13,800 to the 401(k) plan and $43,700 to the DB plan would he be ok?

Thanks for your help, I very much appreciate it!!

[jkdoll2]

One man DB Plan also with a 401(k) Profit Sharing Plan. Compensation is greater than $230,000. His minimum required contribution for the DB plan is $0. The maximum deductible contribution is $73,152.

If I understand correctly the total contributions he would be able to make for 2008 is the sum of:

(1) Minimum DB contribution = $0

(2) 401(k) deferrals = $20,500 (including catch-up)

(3) 6% of comp for profit sharing = $13,800

Now, he is also subject to the greater of the above and the 25% limit (deferrals dont count towards this), correct? So 25% of his compensation is $57,500. Is this the maximum he can contribute and deduct for 2008 in the DB and DC plans combined? So if he contributed $13,800 to the 401(k) plan and $43,700 to the DB plan would he be ok?

Thanks for your help, I very much appreciate it!!

Yes - you can put $43,700.00 into the DB plan. He can since this stays within the 25% limit and is under the maximum allowed contribution for the DB plan.

[Blinky the 3-eyed Fish]

The maximum employer contribution amount is $13,800 in the DC and $57,500 in the DB.

[John Feldt ERPA CPC QPA]

If only 6% is an employer contribution in the DC, then why can't the full $73,152 be deducted in the DB?

I thought the IRS letter on September 13, 2007 explained it that way...

[Blinky the 3-eyed Fish]

Yes, that's correct. I am the victim of late-night posting.

[John Feldt ERPA CPC QPA]

okey day.

Go ahead and deduct the full 73,152 in the DB since the DC contribution is only 6% (13,800) of compensation. The letter says that 404(a)(7) does not apply if the DC plan has employer contributions that are 6% or less.

[John Feldt ERPA CPC QPA]

http://benefitslink.com/articles/guests/ASPPA-9-14-2007.html

http://www.asppa.org/pdf_files/Solomon_Ran...onltr091307.pdf

http://www.asppa.org/pdf_files/Solomon_McC...nltr_091307.pdf

http://www.asppa.org/pdf_files/Solomon_Bau...nltr_091307.pdf

http://www.asppa.org/pdf_files/Solomon_Gra...onltr091307.pdf

[Guest Sieve]

Don't forget the salary deferral. He can make the full DB contribution of $73,152 PLUS $15,500 as a 401(k) deferral PLUS $5,000 as the 401(k) catch-up PLUS $13,800 as a PSP contribution.

[emmetttrudy]

Because the 401(k) contribution is not more than 6% of compensation the DB contribution is not subject to the combined plans deduction limit? So, in final he can make the following contributions and deduct all of them:

(1) $20,500 deferral

(2) $13,800 profit sharing

(3) $73,152 DB

Correct?

[Guest Sieve]

That's correct. It's because the 401(k) salary deferrals are not subject to these deduction limitations at all. The DB + 6% PSP deduction limit does not impact the deductability of salary deferrals. So, under your facts, the deferrals can be deducted no matter the amount.