Contribution limits under DB plan

[Guest cc1898]

In the case of a multiemployer plan where every participant is a collectively bargained EE or alumni, there is no need for the nondiscrimination testing. While DB plans are subject to the annual benefits limitation, I believed that an ER could theoretically contribute as much as the ER wants so long as it meets the minimum funding rules and recognizes that overfunding a DB plan may result in excise taxes on the excess contributions. I can't think of any rule that says the ER is limited in the amount it can contribute on behalf of the EE based on the EE's compensation when you're dealing with a DB plan like this... In other words, if the ER wants to pay $500 in wages, but contribute $1000 to the plan, as long as the EE's AB is limited to $500, there's no problem. I feel like there is something missing here...

[Mike Preston]

You are mixing apples, oranges, grapes, strawberries and bananas. Care to take another crack at it?

[david rigby]

There might be some kumquats in there also.

[Guest cc1898]

You are mixing apples, oranges, grapes, strawberries and bananas. Care to take another crack at it?

Maybe this is easier to understand:

ER wants to submit contributions on behalf of alumni participants to pension plan. ER wants to submit as much as it can so that alumni participants will receive the greatest benefit under the plan (i.e. the greater the contribution rate, the greater the final benefit). However, ER also wants to pay alumni participants minimal wages and presumably, alumni participants would rather have contributions submitted on their behalf at a higher rate than receive wages. What would prevent the ER from basically paying the alumni EEs a salary that consists mostly of contributions to a DB plan?

[Mike Preston]

Nothing. It is done all the time.

I confess that the term "alumni" throws me a bit. Care to define?

If you are saying that a collective bargaining unit negotiates a high(er) benefit for a group of its collectively bargained employees such that it then agrees to a lower wage - this happens all the time. It is the nature of collectively bargained plans.

Yes, there are limitations on the total benefit that can be paid to any participant (generally referred to as the Section 415 limit) that usually revolve around the person's wages. These limits are actuarially determined and it would therefore not be uncommon for an individual whose compensation was $500 to have a benefit that would "cost" $1,000.

But things are much more complicated than what I've described above, so without context the description, although it agrees with your conclusion, is basically useless.