### Question
How does the law define applicable percentage?


### Answer
Under *26 U.S.C. § 416*, **applicable percentage** is defined as:

> the lesser of—



(i) 2 percent multiplied by the number of years of service with the employer, or



(ii) 20 percent

#### Citation:
  - *26 U.S.C. § 416*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter D-Deferred Compensation, Etc. > PART I-PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC. > Subpart B-Special Rules**

