Advantage to limit deferrals to high % of comp?

[mattmc82]

Working way through restatements, as I am sure many of you are doing.

Can anyone think of a good reason for a (Safe harbor!) plan to limit deferrals to 85% of compensation (rather than just no plan imposed limit)?

I am having trouble coming up with a scenario where this will come into play.

thanks

[Lou S.]

When someone tries to defer 100% of pay how do you withhold OASDI taxes?

Generally I've seen plans allow 100% but administratively limit it to 100% after any required deductions. That is certain required deductions take precedence over the deferral election.

[Tom Poje]

pretend there are no taxes to worry about.

the 415 limit is the lesser of 100% of comp or $52,000 (as indexed)

person defers 100% of comp.

how much of the required safe harbor can they receive?

[mattmc82]

that's a good point, thanks. now im wondering if my takeover plans should be restated to limit

[BG5150]

In reality, who ever defers 100%? Except maybe a child or spouse of an owner.

[401king]

pretend there are no taxes to worry about.

the 415 limit is the lesser of 100% of comp or $52,000 (as indexed)

person defers 100% of comp.

how much of the required safe harbor can they receive?

Well, now I'm intrigued. What exactly would you do here?

[AlbanyConsultant]

You can't actually defer 100% of compensation; you'll always lose the 7.65% off the top. As Lou S. said above, it is funtionally 100% of what is left. So that would leave more than enough for a safe harbor allocation.

[Peter Gulia]

I recently saw a provision: the lesser of 100% of compensation or the largest amount that, after applying all wage reductions and deductions, results in net pay no less than $0.01.