Old plan/New plan- are you limited to $30,000?

[Guest Laura Millwood]

If you were participating in a plan that terminated on 3/31, then started participating in a new plan starting 4/1 (new plan is result of several companies merging together- no controlled group issues), are you limited to the $30,000 limit? Can you get $30,000 in the new plan, plus whatever was contributed for you in the old plan?

[MWeddell]

For 415 testing, all defined contribution plans of the same "employer" are aggregated. Thus, whether the $30,000 limit applies to both plans depends on whether they really are separate controlled groups of employers as you assert.

Remember that controlled group is determined by > 50% common ownership for 415 testing, not >= 80% common ownership.

[Guest Laura Millwood]

I agree with what you are saying, but employer is not the same. Ownership is completely different. I feel they would be able to exceed $30,000 because it is two different plans of two different employers.

[KJohnson]

Look at PLR 9541041. Six P.A's merged into a "new corpororation" -- IRS stated that if the prior corporations "ceased to exist" because of the merger then the plans of the prior employers and the plan of the "new" employer would not need to be aggregated for 415. IRS reasoned that corporations must exist at the same time to be under common control. Since "old employer" ceased to exist at the time "new employer" came into existence--no common control and no Section 415 aggregation.

[MWeddell]

Then the answer is yes, a participant will have a separate 415© limit under the old plan that terminated than he or she has under the new plan if they are sponsored by different controlled groups of employers.

[This message has been edited by MWeddell (edited 09-15-1999).]

[Guest Paul McDonald]

Remember that a PLR is only applicable to the party who requested the ruling and is based on their specific facts and circumstances. It is not a blanket ruling applicable to everyone and does not set precedent. A slight change in the facts could result in the service considering it to be the same employer, hence a single limit.