Maximum Cash Balance Contribution

[metsfan026]

Can someone please direct me to the regulations that state what the maximum pay credit per year can be in a Cash Balance/Profit Sharing combo Plan?

Taking over another case where they added the owners spouse onto the Plan, and the 401(k) + Profit Sharing + Cash Balance credit exceeds the salary they are giving her.   Just wanted to make sure what they were doing was alright (they are the only two participants, so there aren't as many testing issues).

[Bri]

415 limits for DB plans are discussed at 1.415(b)-1

(This won't help illustrate the calculation turning their pay credit into the accruing benefit to compare it to one's limit, though.)

[Jakyasar]

Pay credit can exceed the salary, all depends how the formula is written in the document e.g. if written as "the lesser of 100% or X amount" then the pay credit is limited to the salary. This does not mean your deduction is limited to the pay credit. Also, your pay credit could be lower than the required minimum contributions.

All calculations depend on the ages and salaries and also 415 limits under 415(b).

[CuseFan]

Also be careful because I've seen practitioners who implement designs that inflate the annuity benefit to get larger deductible credit amounts but where the account then exceeds the maximum allowable lump sum. If plan is expected to be ongoing for a while then you can usually get that situation reconciled, but the danger is premature death. More of a concern for a single owner plan than husband/wife or multiple owner plan, but something of which to be aware.