Abstract Carruth, Whitehead, and Anderson (CWA 1986) presented a linear programming approach to maximizing contributions to certain elective salary reduction arrangements. However, CWA (1986) assumed a defined-contribution Regular Plan and did not address participation in a defined-benefit Regular Plan; If an employee participates in both a defined-benefit and defined-contribution plan, the employee's benefits must satisfy the defined-benefit (DB) limitation of l.R.C. § 415(b), contributions must satisfy the defined-contribution limitations of I.R.C. § 415(c), and the employee's benefits and contributions together may be subject to the "sum-of-fractions" (SOF) limitation of I.R.C. § 415(e). Consequently, contributions to elective salary reduction arrangements that are optimal under the linear defined-contribution constraints may have to be reduced to satisfy the DB and SOF limitations. This article (1) expands the CWA model by incorporating the DB and SOF limitations; (2) consolidates, modifies, and clarifies some aspects of the linear model presented in CWA (1986); and (3) presents an algorithm for solving the expanded model. Because of space limitations only Stage 1 of a two-stage algorithm appears in this article. Stage 2 is available from the authors upon request.
Anderson et al. (Tue,) studied this question.