Integrated profit sharing contribution - lRM language

[buckaroo]

In the LRM language for an integrated allocation, the third step reads as follows:

© Third, any remaining contributions or forfeitures will be allocated in the ratio that

the sum of each eligible Participant’s Plan Compensation for the Plan Year and Plan Compensation for the Plan Year in excess of the Integration Level (as defined in the Adoption Agreement) bears to the sum of all such Participants’ Plan Compensation and Plan Compensation in excess of the Integration Level, but for each eligible Participant, not in excess of the Maximum Profit Sharing Disparity Rate (defined below). For purposes of this step, in the case of any Participant who has exceeded the cumulative permitted disparity limit, two times such Participant’s total Plan Compensation for the Plan Year shall be taken into account.

I do not fully understand the last sentence in this step. Can anyone explain what this means? Does this have to do with a situation when there is more than one plan? If so, is it if there is a DB plan?

Thanks in advance.

[My 2 cents]

If I remember the rules properly, the DC plan would be unable to recognize permitted disparity for anyone covered by a DB plan providing for permitted disparity (or vice versa?). Also, is there a 35-year limit on application of permitted disparity under DC plans, so that if someone has already had 35 years' worth of contributions based on permitted disparity, the plan has to provide that person contributions without regard to permitted disparity? Perhaps someone more involved with DC plans can give you a better answer.

[Tom Poje]

I have often wondered if someone would ever participate in a plan (or combination of plans) that was (were) integrated for 35 years! without the plan eventually going new comparability is beyond me.

look what step 2 in the LRM says for someone who has reached the limit.

STEP TWO: Any contributions and forfeitures remaining after the allocation in Step One will be allocated to each participant's account in the ratio that each participant's compensation for the plan year in excess of the integration level bears to the excess compensation of all participants, but not in excess of 3% of each participant's compensation. For purposes of this Step Two, in the case of any participant who has exceeded the cumulative permitted disparity limit described below, such participant's total compensation for the plan year will be taken into account.

now look at 1.401(l)-2©(ii) Overall permitted disparity ...employer contributions are allocated to the account of the employee with respect to the employee's total plan compensation at the excess contribution percentage

how all that gets translated for my simple brain gives me a headache.

[austin3515]

I personally would like to see someone prove that integration was used for 35 years... I've always ignored it...