Each Monday 401kBasics posts a new tip as a part of our series “Plan Sponsor Quick Tips”. This series is designed to assist plan sponsors in filling their fiduciary role and running their retirement plan efficiently. Your feedback or suggestions on future articles is welcome.
Nondiscrimination testing is performed on qualified plans to ensure that all participants benefit fairly. In this article we will explain the annual additions limitation test (415), corrective measures and it’s deadlines:
- Internal Revenue Code Section 415 limits the total contributions that a participant can be credited in a single year. These include Elective deferrals, Roth contributions, Employer Match, Profit Sharing.
- The test excludes loan payments, rollovers, and catch-up contributions (If your document has provisions for them).
The limit for 2012 is $50,000 or $55,500 if the participant is eligible for catch-up contributions and may compromise your plan qualification status if exceeded. Hence it’s always a great idea to check with your plan sponsor!
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