Section 401 A 17

This limit applies to a qualified plan in two ways.

Section 401 a 17. Section 401 a 17 provides an annual compensation limit for each employee under a qualified plan. The maximum annual compensation that may be taken into account for benefit computation purposes by a qualified plan is the 401 a 17 limit. Section 401 a 17 limit means the maximum dollar amount of a participant s compensation that can be taken into account for a plan year for purposes of determining contributions or benefits under a qualified retirement plan as set forth in section 401 a 17 of the code.

This limit applies to a qualified plan in two ways. Code section 401 a 17 establishes compensation limits for a variety of tax purposes. In order to be a qualified plan a plan must satisfy section 401 a 17.

If compensation is measured on the basis of a full 12 month period during which the short plan year occurs in the case of an ongoing plan the irc section 401 a 17 limit is not prorated. 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. A section 401 a 17 employee means an employee whose current accrued benefit as of a date on or after the first day of the first plan year beginning on or after january 1 1994 is based on compensation for a year beginning prior to the first day of the first plan year beginning on or after january 1 1994 that exceeded 150 000.

If compensation is measured on the basis of the short plan year the irc section 401 a 17 limit must be prorated. In order to be a qualified plan a plan must satisfy section 401 a 17.