Money purchase plan and 404(a)(3)(A)

[Ken Davis]

Is a money purchase plan maintained by a governmental entity subject to the 25% deduction limit under 404(a)(3)(A), even though the governmental entity needs no tax deduction?

Thanks,

Ken Davis

[ETA Consulting LLC]

No, it is not. It is only subject to the 415 limit. Remember though, the formula must be written in the plan since it is subject to required funding, but you may have a formula that states 50% of Compensation for argument sake.

Good Luck!