Another DB/DC Max Deductible Question

[Lou S.]

DB - NOT covered by PBGC

Assume the following applies to both plans

- all participants covered by both plans

- covered payroll = $1,000,000

- MRC in DB = $250,000

- Max deductible in DB = $400,000

- 6% of pay in DC = $60,000

- 25% of covered payroll $250,000

Can sponsor make max deductible of $400,000 + $60,000 to DC plan and deduct them both?

or

Is sponsor limited to $250,000 MRC in DB + $60,000 to DC plan?

That is if the MRC in DB is 25% or more of covered pay is the sponsor limited to MRC in DB + 6% DC or can the sponsor always take max DB + 6% DC

I feel this should be straight forward but for some reason I'm brain cramping.

[Calavera]

Can sponsor make max deductible of $400,000 + $60,000 to DC plan and deduct them both?

Yes, assuming he has room for deduction from tax perspective.

[Lou S.]

Thank you. That's very helpful.

[Andy the Actuary]

IRC 404(a)(7)©(iii)

(iii) Limitation In the case of employer contributions to 1 or more defined contribution plans— (I) if such contributions do not exceed 6 percent of the compensation otherwise paid or accrued during the taxable year to the beneficiaries under such plans, this paragraph shall not apply to such contributions or to employer contributions to the defined benefit plans to which this paragraph would otherwise apply by reason of contributions to the defined contribution plans