Compensation limit for short initial plan year

[Sully]

Question has come up on the compensation limit for a short initial plan year.

Facts:

Plan year 10/1 – 9/30

Limitation year is the plan year

Plan effective 1/1/2012

Should the comp be limited to:

$183,750 (245,000 * 9/12), or

$187,500 (250,000 * 9/12)

Thanks in advance.

[ETA Consulting LLC]

Your plan year began in 2012. It's a short plan year that BEGAN in 2012

You'd use to $250K limit when prorating.

Good Luck!

[Tom Poje]

answer is unclear from the data provided

limitation year = plan year, generally implying a 12 month period so no proration.

per terms of the document, what compensation is being used?

is it for the full 12 month period even though the effective date is from 1/1?

if it's the full 12 months then no proration.

ERISA Outline Book point this out (3B.16 in the latest version)

(Not sure I would even know that if I didn't read it)

[Sully]

Compensation is based on the Plan Year (1/1/12 – 9/30/12 in this case). Therefore, we should use $187,500 (250,000 * 9/12).

Thank you both for the clarification. I made the issue more confusing than it needed to be. Imagine that…