Off calendar - compensation to use

[Pammie57]

I just picked up a 9/30/2015 plan and the compensation listed for owners was 265000 - so I was wondering if that is correct or if the compensation is based on the year the plan began - as in 260000?

[Lou S.]

401(a)(17) is limit in effect at start of the year.

415 is limit in effect at the end of the year.

At least that's the way I've always learned it. Though I think you CAN get some different results if the Limitation year is defined differently than the Plan year.

[Tom Poje]

that is correct, most limits are beginning of the year e.g. 1.401(a)(17)-1(b)(3)(ii) "...for the calendar year in which the plan year begins."

the 415 limit is the only limit that is based on the end of the year, e.g. 1.415-5(a)(2)"...applies with respect to limitation years ending with or within the calendar year.

of course deferral and catch ups sort of disregard that as they are individual limits based on the calendar year.

In 1993 the comp limit was over 235,000 and in 1994 the wonderful boys in Congress reduced things to 150,000. so a number of DB plans were amended from calendar year end to 12/30 year end (a short plan year by only 1 day), but it meant you could use the higher comp for one more year as you used the beginning of year limit. Just in case you pick up an old plan that has been around forever and has a 12/30 year end and you wondered why!