Max Deductible Limit?

[austin3515]

Any reason why a 403b plan cannot contribute more than the max deductible? So two people make $100,000 each. Can they each get $50,000 in profit sharing? That's 50% of comp.

I'm inclined to say no because, duh, they are not deducting anything. But the closest I can come to guidance is through the process of elimination. I want something more concrete, like a McCay Hochman article or an IRS FAQ. Anyone?

(assume reasonable comp is not an issue as that is a matter for the CPA to address and not me!).

[Doghouse]

I don't know if you'll find anything specifically saying that the deduction rules don't apply here, but for what it's worth, IRC 404 does define the types of plans to which it applies, and 403(b) isn't one of them...

[austin3515]

I tried to read it but it was gobbledygook.

[david rigby]

Does a non-profit organization have to worry about deductions?

[austin3515]

The answer is of course "no" but still I'm looking for something in writing that says "403b's need not concern themselves with that limitation, and as such if your contributions exceed 25% of eligible comp, that's no problem."

I'm honestly surprised I can't find an article on point. But admittedly the plan where this coming up is " very unusual."

[Belgarath]

I think what you are looking for is 4972(d)(1)(B). Since the excise tax doesn't apply, and since "deductions" aren't an issue, then as long as you stay within the 415 limits, you should be fine.

I do seem to recall, in a hazy way, that there may be an issue if the tax-exempt maintains the plan jointly with a for-profit organization, but I'm guessing this is pretty rare. However, if that applies, you may want to look at it more carefully.

[david rigby]

Good cite. Note that 4972(d)(1)(B) references 4980©(1).

In the latter section, note the phrase "...at all times.."

[austin3515]

Exquisite!!!