With the threat of IRS audits looming on the horizon, it is important to take the appropriate measures to ensure that your employees are not exceeding the legal limits. This entails accurate MAC calculations and an ongoing system that monitors your employees’ contributions to avoid excess contributions.

The MAC for each employee is determined by calculating two limits. The 415 Limit (also known as the Annual Additions Limitation) and the 402(g) Limit (also known as the Annual Deferral Limitation). The IRS restricts clients to the smaller of these limits.

It is necessary to have ongoing systems in place to monitor contributions in order to avoid overfunding. The absence of adequate controls can turn a plan into a liability! One of ADSERV’s control mechanisms, the Excess Contribution Alert, will provide notification if an employee's contributions are nearing the relevant annual limit (unless the employee is eligible for a catch-up provision).