Highlights Of The Pension Protection Act Of 2006

I. PROVISIONS AFFECTING ESOPS S Corp UBIT Exemption The unrelated business income tax (“UBIT”) exemption that currently applies to S corporation ESOPs, together with the related §409(p) anti-abuse provisions, have been made permanent. These provisions were scheduled to expire at the end of 2010. As the result of PPA, these provisions have been made permanent, and S corporations that sponsor ESOPs will continue to be exempt from income tax and from UBIT to the extent that company stock is held by an ESOPs. ESOP Diversification PPA does not mandate any additional diversification requirements for ESOPs maintained by private companies. Similarly, PPA does not mandate any additional diversification requirements for ESOPs maintained by public companies, provided that the ESOP is a stand-alone plan. The following additional diversification requirements do apply for plan years after December 31, 2006 if the ESOP is maintained by a public company and the ESOP is combined with a ... Read More..

Contribution and Allocation Limitations

CONTRIBUTION AND ALLOCATION LIMITATIONS FOR PLAN YEARS ENDING IN 2009 Date: January 2010 C CORPORATION CONTRIBUTION LIMITATIONS (Sec. 404 of the Code): Example: (The Sec. 404 limit is calculated for all employer plans in the aggregate.) Sec. 404 Gross Compensation 1 $245,000.00 Less Sec. 401(k) Salary Reduction 0.00 Less Sec. 125 Salary Reduction 0.00 Net Compensation $245,000.00 x 25% (or 50% if the ESOP is leveraged)2 x 25% Maximum Total Contribution to All Plans 3 $61,250.00 Less Sec. 401(k) Salary Reduction 0.00 Less Employer Matching Contribution ( 2,000.00) Less Employer Discretionary Contribution ( 2,000.00) Maximum ESOP Contribution (Sec. 404) $57,250.00 It should be noted that compensation in excess of $245,000 per individual is excluded for purposes of Sec. 404, but not for purposes of Sec. 415. In the case of C corporation, company contributions are limited to 25% of eligible payroll, provided that the ESOP is not leveraged. If the ESOP is ... Read More..