|
|
Although the basic concept of the Individual(k)
plan is relatively straightforward-business owners putting away
25 percent of compensation plus an additional $15,500 for 2008, $20,500 if age
50 or over, many tax professionals are interested in gaining a better
understanding of the federal laws that give rise to this new type of business
retirement plan. Following are excerpts from some of the more pertinent
sections of the Internal Revenue Code (IRC) as they pertain to Individual(k)
plans. (Recall, the term Individual(k) is simply a name created to describe a
new type of 401(k) plan designed specifically for owner-only businesses-the
term Individual(k) does not actually appear in the IRC.)
- IRC Sec. 401(k)
— IRC section that created 401(k) plans
- IRC Sec. 401(c)(1)
— Defines self-employed business owners
- IRC Sec. 401(c)(2)
— Defines earned income for self-employed business owners
- IRC Sec. 402(g)
Before Pension Reform — Prescribes the annual per-participant
limit on employee salary deferrals prior to 2002
- IRC
Sec. 402(g) After Pension Reform — Prescribes the
annual per-participant limit on employee salary deferrals effective
January 1, 2002
- IRC Sec. 404(a)(3)(A)
Before Pension Reform — Prescribes the overall limits
on deductible contributions prior to 2002
- IRC Sec. 404(a)(3)(A)
After Pension Reform — Prescribes the overall limits
on deductible contributions effective January 1, 2002
- IRC Sec. 404(a)(8)
— Defines self-employed individuals
- IRC Sec. 404(a)(12)
As Added by Pension Reform — Defines compensation,
which includes employee salary deferrals, used to calculate deductible
contributions
- IRC Sec. 414(b)
- IRC Sec.
415(c) Before Pension Reform
- IRC Sec.
415(c) After Pension Reform
- IRC Sec. 415(c)(3)
— Defines compensation, which includes employee salary deferrals,
used to calculate annual additions
©2007 Ascensus, Inc., Brainerd, MN
|
