415 Calculation in Leveraged ESOP

[Guest AG]

In a leveraged ESOP where less than 1/3 allocation goes to HCE's how is 415 calculated?

[RLL]

The annual additions under IRC Sec. 415© include the contributions used to pay loan principal, any contributions that are not used for loan payments (but not the contributions used to pay loan interest), and any reallocated forfeitures (other than forfeitures of leveraged shares).

If the fair market value of the "released" shares is less than the amount of contributions used to pay loan principal, you can use the lesser amount to determine annual additions if the ESOP plan document so provides.