Plan 415 Refund

Can anyone give me an understandable explanation of a "Plan 415 Refund"?


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  • 415 limits are also known as "annual additions" limits. The definition of these limits just changed this year with the passage of EGTRRA.

    Annual additions are the "deposits" made to a participant's account in a defined contribution plan. These contributions include things like salary deferrals, company match, profit sharing contributions, and forfeitures. Section 415 limits the amount of annual additions that can be made on behalf of a participant. Before EGTRRA, the two aspects of annual additions limits to a plan were a percentage-of-compensation limit and a dollar limitation. In 2001, the annual additions limit was the lesser of 25% of comp or $30,000 (as indexed.)

    EGTRRA has repealed the 25%-of-compensation portion of the limits. Additionally, the dollar limitation was increased to $40,000. So, the annual addition for 2002 is the lesser of $40,000 or 100% of comp.

    For 415 purposes, there is a specific defintion of compensation which may or may not match the definition of comp for other plan purposes (like for defining salary deferral amounts or profit sharing allocations.)

    Hope this helps!
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