Guest Posted March 3, 2000 Posted March 3, 2000 The plan documents should state which contributions get limited first. THe 25% 415 limit still applies in any case.
Guest James J O'Connell Posted March 3, 2000 Posted March 3, 2000 I am not a very seasoned individual in the DC plans. I have had managers in the past that have not consistently applied these tests in the same manner. My question is what exactly has to be done with these two caps. Is it true that the maximum contribution into both plans cannot exceed $10,500? If this is true, is it also necessary that the administrator must limit the pre-tax contributions to these DC plans at 25%?
John A Posted March 3, 2000 Posted March 3, 2000 I would suggest you get help from a third party administrator on this. The rules for the 402(g) limit seem to be pretty straightforward, but the 415 limits for 403(B) plans are somewhat complex. The 402(g) limit applies to all salary deferrals from both 401(k) plans and 403(B) plans. The limit was $10,000 for 1999 and is $10,500 for 2000. So if an employee defers $5,500 into the 403(B) plan, the employee is limited to deferrals of $5,000 into the 401(k) plan for the year 2000. The 415 limit applies to all additions to the employee's account, which includes both employee deferrals and employer contributions. The 415 limit is the lesser of $30,000 or 25% of compensation. Up to 12/31/99, it appears that this limit was applied separately to 403(B) and 401(k) plans, so that it would be possible for some employees to have total additions of $60,000 between the two plans. This was apparently linked to IRS Code Section 415(e), which has now been repealed. So it is possible that, for the year 2000, the limit will have to be applied by combining the plans. There are quite a few special rules about the 415 limit relating to 403(B) plans and I do not know a lot about 403(B) plans, so I again suggest you get a professional to help you through the rules. Still, I hope I've given you a starting point. Good luck.
John A Posted March 3, 2000 Posted March 3, 2000 You may wish to post your message on the 403(b) message board rather than under the Form 5500 board.
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