Code Section 401(a)(17)

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Code Section 401(a)(17) establishes compensation limits for a variety of tax purposes.

For example:

  • The maximum annual compensation that may be taken into account for benefit computation purposes by a qualified plan is the 401(a)(17) limit. (Note: Elective deferrals into a 401(k) plan may be made from a participant's salary even after he has been paid more in salary than the 401(a)(17) limit; i.e., once salary exceeds $230,000 for a year, that does not mean that a participant may no longer make elective deferrals. All formulas in a plan, however, must comply with the 401(a)(17) compensation limit.)
  • An excess benefit plan may also not take into account compensation beyond the 401(a)(17) limit. Top-hat plans are not subject to this limitation.
  • Severance plans claiming exemption from 409A make not take into account compensation more than two times the 401(a)(17) limit.

The limit is adjusted for inflation. For 2007, the 401(a)(17) limit was $225,000, and for 2008 the 401(a)(17) limit is $230,000. For 2009 and 2010, the limit was $245,000.

See Dollar Limitations for other limits on benefits plans..