The following is a list of affected sections of the Code and the 2014 limitations of interest to the ESOP community Code Section Description 2016 Limitations 2015 Limitations 401(a)(17) Limit on the amount of annual compensation taken into account $265,000 $265,000 402(g)(1) Limitation on the exclusion for elective deferrals described in Section 402(g)(3) of the Code $18,000 $18,000 409(o)(1)(C)(ii) Dollar amount for determining the maximum account balance in an ESOP subject to 5 year distribution period $1,070,000 $1,070,000 414(q)(1)(B) Limitation used in the definition of “highly compensated employee” $120,000 $120,000 414(v)(2)(B)(i) Dollar limitation for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) of the Code $6,000 $6,000 415(b)(1)(A) Limitation on the annual benefit under a defined benefit plan $215,000 $215,000 415(c)(1)(A) Limitation on the annual contribution and other additions for a defined contribution plan $53,000 $53,000 416(i)(1)(A)(i) Limitation used in ... Read More..
I. INCREASES IN CONTRIBUTION, DEDUCTION AND BENEFIT LIMITS Contribution Deduction Limits. The limit on an employer’s deduction for contributions to a non-leveraged ESOP or a profit sharing plan is increased from 15% to 25% of participants’ aggregate compensation. 401(k) deferrals are not counted for purposes of the deduction limits. However, 401(k) deferrals will be included for purposes of calculating the compensation on which this limit is based. The deduction limit for money purchase pension plans remains at 25%. Effective: Taxable years beginning after 2001. Individual Benefit and Contribution Limits. The dollar limit on “annual additions” to a participant’s account in an ESOP, profit sharing, 401(k) or other defined contribution plan is increased to $40,000 in 2002. The alternative limit of 25% of compensation is increased to 100%. Effective: Limitation years beginning after 2001. Annual Compensation. The maximum annual compensation of a participant that may be used to calculate contributions and ... Read More..
Comparison of Old and New Provisions Current Law New Law (EGTRRA) I. Increases in Contribution, Deduction and Benefit Limits Contribution Deduction Limits: An employer’s deduction for contributions (including 401(k) deferral contributions) to a profit sharing or stock bonus plan is limited to 15% of participants’ taxable compensation. The money purchase plan limit is 25%. The 15% deduction limit is increased to 25%. 401(k) deferrals do not count against the limit. Compensation used to determine deductions includes deferrals. Money purchase plan limit remains at 25%. Effective: Employer’s taxable years beginning after December 31, 2001 Individual Benefit and Contribution Limits: Allocations of employer and employee contributions and forfeitures in a profit sharing, 401(k) or other defined contribution plan cannot be greater than the lesser of (i) 25% of gross pay or (ii) $35,000 (indexed). Allocations of employer and employee contributions and forfeitures cannot be greater than the lesser of (i) 100% of gross pay or (ii) $40,000 (indexed). Effective: Limitation years beginning after December 31, 2001 Annual Compensation: Currently a ... Read More..