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Section 415(c)(2) provides that "annual addition" means the
sum for any year of--:
(A) employer contributions,
(B) the lesser of--
(i) the amount of the employee contributions in
excess of 6 percent of his compensation, or
(ii) one-half of the employee contributions,[4]
and
(C) forfeitures.
The dispute in this case focuses on whether amounts
contributed to the trust and allocated to the accounts of Robert
and Charlene Peers exceeded the section 415 limitations. The
parties disagree as to what constitutes "participant's
compensation" for purposes of section 415 and as to whether
elective salary deferrals constitute employee or employer
contributions.
Petitioner asserts that the commissions it paid Robert and
Charlene Peers as independent contractors constitute
"participant's compensation" for purposes of section 415.
Petitioner also asserts that the amounts of elective salary
deferrals are employee contributions and should be included in
"participant's compensation." Thus, petitioner maintains that
the limitations of section 415(c)(1) have not been exceeded with
4Sec. 415(c)(2)(B) was amended by the TRA 1986 sec.
1106(e)(1), 1106(i), 100 Stat. 2424, 2425, for the years
beginning after Dec. 31, 1986, to include the entire employee
contribution in the computation of the annual addition.
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