25% Deduction Limit for DC Plan as part of combo

[emmetttrudy]

Plan Sponsor has a PBGC-covered DB Plan and a 401k Profit Sharing Plan. I understand because of the PBGC coverage there is no combined deduction limit. However, does the 25% limit still apply to the DC plan only? My understanding is that yes, it does.

For example, they could deposit and deduct as much as they want into the DB Plan. And in the DC Plan, anything up to 25% of compensation is allowable. But anything over 25% in the DC plan would be a non-deductible contribution and subject to an excise tax.

[C. B. Zeller]

You are correct that the 25% limit applies alone to the DC plan when the DB plan is covered by the PBGC.

The DB plan is still subject to its own limit, so they can can only do "as much as they want" to the extent they do not want to do more than permitted under 404(o).

Assuming the DC plan is a profit sharing plan, they of course have to have some profit left over after the DB contribution in order to make a contribution to the DC plan. If they do, they can contribute up to 25%.

[emmetttrudy]

Thank you, that's what I was hoping to confirm. And yes, "as much as they want" up to the 404 maximum deductible amount.