Reduction to 404 deduction limit for HCE amendments

The firm that I work for can't really decide how this adjustment should be made so I'll appeal to a larger audience and hope the flaming isn't too intense.

2024 calendar year plan, EOY valuation. 12/31/2024 assets $2,209,224.

Before the amendment, the total maximum liability at 12/31/2024 is $2,095,478 ($1,911,601 FT + $183,877 TNC). After the amendment, the total maximum liability at 12/31/2024 is $3,465,035 ($1,911,601 FT + $1,553,434 TNC). The increased maximum liability due to the amendment is $1,369,557.

After the amendment, the required minimum as of 12/31/2024 is $1,438,375, so this amount plus any interest discount as of the date of deposit is fully deductible, even if the adjusted deduction limit is smaller. Please correct me if that's wrong.

If we pretend there is no reduction, the 2024 deduction limit would be $1,911,601 FT + (1,911,601 * 0.5) cushion + 1,553,434 TNC - 2,209,224 assets = 2,211,612.

What we can't agree on is where the increased liability is subtracted. Our software suggests that we'd subtract the increased liability from the max FT before calculating the 50% cushion: ($1,911,601 FT + ((1,911,601 - 1,369,557) * 0.5) cushion + 1,553,434 TNC - 2,209,224 assets = $1,526,833. Discussions have suggested that the increase liability should simply be subtracted from the unadjusted deduction limit, so $2,211,612 - 1,369,557 = $842,055 (ignored since required minimum is higher). Some have even argued that there is no reduction since the FT does not increase due to the amendment, but that seems unreasonable.

Would love any feedback you all can provide. 

Amendments increasing benefits for HCEs are excluded from the calculation of the cushion amount only. In other words, the maximum deduction is equal to

Funding target + Target normal cost + 50%*(Funding target without amendment) - Assets

Since the amendment didn't affect the funding target, there is no adjustment to the cushion in your case.

You will most likely have to do the adjustment for 2025, as the increase in the 2024 accrual (evident from the increase in the target normal cost) will become part of the 2025 funding target.