The Demise of Section 415(e): A `Plus' or `Problem' for Retirement Planners?

Shanney-Saborsky, Regina
January 2000
Journal of Financial Planning;Jan2000, Vol. 13 Issue 1, p38
Academic Journal
This article discusses the impact of the repealed section 415(e) of the Small Business Job Protection Act of 1996 on retirement planning in the United States. This section set limitations on the amounts an employee could receive when participating in a qualified defined benefit and defined contribution plan sponsored by the same employer. In addition, for limitation years beginning on or after January 1, 1998, the 1996 act modified the definition of compensation that is used for computing contribution levels and the corresponding benefits provided by qualified plans by including certain elective deferrals and elective contributions in the definition of compensation. From a planning perspective, the primary question associated with the repeal of Section 415(e) is whether it will result in an opportunity to increase the level of retirement benefits available under qualified plans or create unanticipated ramifications that may negatively affect retirement planning for a plan sponsor. The overall provisions of Section 415 will not be violated if either a defined benefit or defined contribution plan provides a benefit in excess of the pre-1996 act limitations. The timing of the amendment by the plan sponsor is critical and a review of plan provisions essential to ensure that the decision remains at the discretion of the employer and not mandated by the provisions of the Internal Revenue Code.


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