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This subsection within IRC Sec. 415(c), affected
only slightly by pension reform legislation, provides the definition
of compensation used to determine the per-participant limitation
on annual additions to a qualified retirement plan, including a
401(k) plan. IRC Sec. 415(c)(3)(D) specifically states that compensation
for this purpose includes employee salary deferrals.
IRC Sec. 415(c)(3)
(C) Special rules for permanent and total
disability
In the case of a participant in any defined contribution plan
(i) who is permanently and totally disabled
(as defined in section 22(e)(3)),
(ii) who is not a highly compensated employee
(within the meaning of section 414(q)), and
(iii) with respect to whom the employer elects,
at such time and in such manner as the Secretary may prescribe,
to have this subparagraph apply, the term ''participant's compensation''
means the compensation the participant would have received for
the year if the participant was paid at the rate of compensation
paid immediately before becoming permanently and totally disabled.
This subparagraph shall apply only if contributions made with
respect to amounts treated as compensation under this subparagraph
are nonforfeitable when made. If a defined contribution plan provides
for the continuation of contributions on behalf of all participants
described in clause (i) for a fixed or determinable period, this
subparagraph shall be applied without regard to clauses (ii) and
(iii).
(D) Certain deferrals included
The term ''participant's compensation'' shall include -
(i) any elective deferral (as defined in section
402(g)(3)), and
(ii) any amount which is contributed or deferred
by the employer at the election of the employee and which is not
includible in the gross income of the employee by reason of section
125 or 457.
(Pension reform added this last paragraph to
IRC Sec. 415(c)(3).)
(E) ANNUITY CONTRACTS.-In the case of an annuity
contract described in section 403(b), the term 'participant's compensation'
means the participant's includible compensation determined under
section 403(b)(3).
©2007 Ascensus, Inc., Brainerd, MN
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