Effect of 401(k) Deferrals on E/er 15% Deduction Limit on Contribution

[chris]

Do e/ee deferrals under 401(k) count against e/er's 15% contribution limit?? In other words, where e/er maintains PSP with 401(k) salary deferral, would deferrals by other e/ee's keep highly compensated e/ee's from getting to 30K limit because of overall 15% deduction limit on e/er's contribution??

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[Dan]

Yes employee deferrals (and all other plan contributions) are included when testing 404©. The net result can be that an owner may not accrue a full $30,000 benefit due to deductibility limits.