Section 415 Limits

Background and summary section 415 of the internal revenue code limits the amount of benefits that may be paid to a participant in a defined benefit plan.

Section 415 limits. Comprehensive section 415 regulations were last issued in 1981. Irc section 415 requires the limits to be adjusted annually for cost of living increases. To satisfy the irc 415 b limits the plan must limit the lump sum distribution to 60 000 which for this example is assumed to be the present value of the 6 000 annual annuity benefit limited to the 415 b 1 b compensation limit.

1 2020 the limitation for defined benefit plans under code section 415 b 1 b is computed by multiplying the participant s compensation limitation as adjusted through 2019 by 1 0176. The tax law places limits on the dollar amount of contributions to retirement plans and iras and the amount of benefits under a pension plan. Maximum employee elective deferral.

Named for section 415 of the internal revenue code irc the 415 limit reflects the maximum allowable contributions to a qualified retirement savings plan in a given year. In the case of a plan which satisfied the requirements of section 415 of the internal revenue code of 1986 for its last year beginning before january 1 1987 the secretary of the treasury or his delegate shall prescribe regulations under which an amount is subtracted from the numerator of the defined contribution plan fraction not exceeding such numerator so that the sum of the defined benefit plan fraction and the defined contribution plan fraction computed under section 415 e 1 of. Maximum employee elective deferral plus catch.

The 401 a 17 annual compensation limit applicable to retirement plans increased from 280 000 to 285 000. Under 415 d the adjustments are to be made under adjustment procedures similar to those used to adjust benefit amounts under 215 i 2 a of the social security act. What is the 415 limit.

For a participant who separated from service before jan. The 415 c contribution limit applicable to defined contribution retirement plans increased from 56 000 to 57 000. Cost of living adjusted limits for 2020 effective january 1 2020 the limitation on the annual benefit under a defined benefit plan under 415 b 1 a is increased from 225 000 to 230 000.