YOU ASK:

What is the definition of Section 415?

WE ANSWER:

Section 415 refers to the portion in the Internal Revenue Code that sets limits on how much can be contributed to qualified retirement plans. It also involves limits on the benefits to be received under the plans.

For a retirement plan to be considered qualified under Section 415, it should meet the requirements of the Employee Retirement Income Security Act (ERISA), as well as IRS Section 401(a). As a result, qualified retirement plans enjoy some tax benefits such as the fact that all contributions to the fund, as well as earnings on these contributions are tax-deferred until such a time that the fund owner decides to withdraw his funds.

Plans that may qualify include pension plans, profit sharing plans and 401(k) plans.

The IRS annually adjusts the limits prescribed to allow for inflation and cost-of-living increases.

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