DB/DC Combined 6% limit

[QNPG]

For purposes of the 6% of pay limit in a combined plan deduction calculation, if a participant in the DC plan does not receive any employer funded contribution, but is eligible for the 401(k) part and does or does not defer, is their compensation included in the 6% calculation? Some argue you include their comp if they’re eligible to defer. Others, like me, say you only include their comp if they get employer money; deferrals irrelevant.

Your input is greatly appreciated.

edit: typo.

[chc93]

I don't recall this issue for a DB/DC combo. But I'm sure I recall, years ago from ASPPA conferences, that for a stand-alone 401k PS plan, as long as a participant is eligible to defer, his comp gets counted for the 25% deduction limit whether he defers or not, and whether he gets a PS contribution or not. But for a stand-alone PS plan, his comp only gets counted if he is eligible to receive a PS contribution (such as 1000 hours and/or last day).

[Tom Poje]

chc93

what the issue boils down to is the change in law. deferrals no longer count toward deductibility, so the 'guess' amongst some folks, at least as expressed at the ASPPA Conferences is that you only count compensation if someone receives a match or profit sharing (at least the conservative approach)

[TPApril]

in a defined benefit plan for a small family owned company, in preparing an allocation of the db contribution, is it possible that the owner may appear to have over 100% of compensation put into db/dc plans, as long as the 25%/31% limit is being met on total compensation? This situation involves owner, spouse, child where only owner maxes out comp.

[Mike Preston]

Depending on age, benefit formula, assets the answer is clearly yes.