N.J. Admin. Code § 17:6-5.8

Current through Register Vol. 56, No. 23, December 2, 2024

Section 17:6-5.8 - Plan to satisfy limit on annual additions

(a) To the extent required under IRC § 415(c), in no event shall the "annual addition," as defined in this section for a participant for any Plan Year, exceed the lesser of:

1. $ 45,000, as adjusted ($ 50,000 in calendar year 2012, $ 49,000 in calendar years 2009 through 2011, and $ 46,000 in calendar year 2008); or

2. One hundred percent of the "compensation," as defined in this section, of such participant received during the Plan Year.

(b) For purposes of this section and subject to IRC § 415(f)(1)(B), all defined contribution plans of each employer are to be treated as a single defined contribution plan.

(c) If the annual addition for a participant under the Retirement Plan, determined without regard to the limitation of (a) above, would have been greater than the annual addition for such participant as limited by (a) above, then the excess shall be corrected as permitted under the Employee Plans Compliance Resolution System (or similar Internal Revenue Service correction program).

(d) For purposes of this section, "annual addition" means the annual addition as defined in IRC § 415(c)(2) and as modified in IRC § 415(l)(1) and 419A(d)(2). In general, IRC § 415(c)(2) defines the annual addition as the sum of the following amounts credited to a participant's account for the limitation year under the Retirement Plan and any other qualified defined contribution plan maintained by an employer:

1. Employer contributions; and

2. Employee contributions.

(e) For purposes of this section, the following types of contributions are not treated as employer contributions and are not "annual additions":

1. The restoration of an employee's accrued benefit, or any other restoration, by the employer in accordance with IRC § 411(a)(3)(D) or IRC § 411(a)(7)(C) will not be considered an annual addition for the limitation year in which the restoration occurs.

2. The transfer of funds from one qualified plan to another will not be considered an annual addition for the limitation year in which the transfer occurs.

(f) For purposes of this section, the following types of contributions are not treated as employee contributions and are not "annual additions":

1. Rollover contributions (as defined in IRC §§ 402(c)(1), 403(a)(4), 408(d)(3), 401(a)(31), 403(b)(8) and 457(e)(16);

2. Repayments of amounts described in IRC § 411(a)(7)(B); or

3. The direct transfer of employee contributions from one qualified plan to another.

(g) For purposes of this section, "compensation" means compensation as defined in IRC § 415(c)(3), as determined by the Plan Administrator consistent with the regulations under that IRC section. In general, IRC § 415(c)(3) defines compensation as all of a participant's wages as defined in IRC § 3401(a) for the purposes of income tax withholding at the source but determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in IRC § 3401(a)(2)); provided, however, compensation shall also include the amount of any elective deferrals, as defined in IRC § 402(g)(3), and any amount contributed or deferred by the employer at election of the employee and which is not includible in the gross income of the employee by reason of IRC § 125, 132(f), or 457. "Compensation" for purposes of this section shall not include any picked-up employee contributions to the Plan under IRS § 414(h). Compensation for a limitation year is the compensation actually paid or includable in gross income during such limitation year; provided, however, amounts earned during that limitation year but paid after the limitation year solely because of the timing of pay periods and pay dates shall be included if the amounts are paid during the first few weeks of the next limitation year, the amounts are included on a uniform and consistent basis with respect to all similarly situated participants, and no such compensation is included in more than one limitation year. However, compensation paid by the later of two and one-half months after severance from employment or the end of the limitation year that includes such severance from employment shall be included in compensation if it is payment that, absent a severance from employment, would have been paid to the participant while the participant continued in employment with the employer and is:

1. Regular compensation for services during the participant's regular working hours, or compensation for services outside the participant's regular work hours (such as overtime or shift differential), commissions, bonuses, or other similar payments, and the compensation would have been paid to the participant prior to a severance from employment if the participant had continued employment with the employer;

2. Payments for unused accrued bona fide sick, vacation or other leave, but only if the participant would have been able to use the leave if employment had continued; or

3. Payments pursuant to a nonqualified unfunded deferred compensation plan, but only if the payments would have been paid to the participant at the same time if the participant had continued employment with the employer and only to the extent that the payment is includible in the participant's gross income.

(h) Any payment to a participant paid by the employer not described above is not considered compensation if paid after severance from employment, even if it is paid within two and one-half months following severance from employment except as otherwise provided under 17:6-16.2 3.

(i) For purposes of this section, an employee who is in qualified military service (within the meaning of Internal Revenue Code Section 414(u)(1)) shall be treated as receiving compensation from the employer during such period of qualified military service equal to:

1. The compensation the employee would have received during such period if the employee were not in qualified military service, determined based on the rate of pay the employee would have received from the employer but for the absence during the period of qualified military service; or

2. If the compensation the employee would have received during such period was not reasonably certain, the employee's average compensation from the employer during the 12-month period immediately preceding the qualified military service (or, if shorter, the period of employment immediately preceding the qualified military service).

(j) For purposes of this section, compensation of each participant shall not exceed the applicable limit established by IRC § 401(a)(17) as of the first day of the limitation year, as increased for the Cost of Living Adjustment ($ 250,000 for 2012, $ 245,000 for 2009 through 2011, and $ 230,000 for 2008). The Cost of Living Adjustment in effect for a limitation year applies to compensation for the Plan Year that begins with or within such limitation year.

N.J. Admin. Code § 17:6-5.8

Amended by R.2012 d.130, effective 7/2/2012.
See: 44 N.J.R. 559(a), 44 N.J.R. 1917(a).
Rewrote (a)1; and in (j), substituted "($ 250,000 for 2012, $ 245,000 for 2009 through 2011, and $ 230,000 for 2008)" for "($ 245,000 for 2011)".