IRS Compliance Testing : 4Limits Testing. In order to ensure that employee benefit plans do not violate certain standards that the DOL and IRS believe are important, plans are subjected to annual compliance tests. These tests are designed to ensure that the amount employees are deferring is within . Code Section 4– Limit on Annual Additions.
In any plan year the employer- provided benefits that participants can accrue in defined benefit plans and the amounts that can be contributed to defined contribution plans are limited.
This limit is always monitored by calendar year and is the lesser of 1 of gross .
This test determines whether any participant exceeded their 4Annual Additions Limit on total overall annual contributions.
There are several tests to be complete and all or some of these tests are required depending on the type of plan. Because these contributions are defined separately in IRC code 414(v), they are not included as annual additions under section 415.