How do ESOP allocations interact with limits for other benefit plans?

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The rules are as follows:Companies can make tax-deductible contributions of up to 25% of the aggregate eligible pay of employees in the plan (or plans), regardless of whether the ESOP is leveraged or not, or in a C or S corporation. In C corporation ESOPs, reasonable dividends used to repay a loan, that are passed through to participants, or are reinvested by participants in company stock in the ESOP, do not count towards the 25% limit. Eligible pay is defined to include employee deferrals into 401(k) plans or cafeteria plans. This limit applies to the total amount of a company's contributions to its defined contribution plans (ESOPs, stock bonus plans, profit sharing plans, and 401(k) plans). (See below in this answer for an exception for leveraged C corporation ESOPs.) Contributions to defined benefit plans do not count towards this limit. The maximum &#34;annual addition&#34; to any one individual's defined contribution accounts under the plans cannot exceed the lesser of  100% of pay or $72,000 in 2026, to be indexed for inflation annually. Employee deferrals do count towards the 100% of pay or maximum dollar limitation. Annual additions thus include all employer and employee contributions to defined contribution plans. In S corporations, interest payments and forfeitures count towards the maximum annual addition limits, and interest payments count towards the 25% of pay maximum deductible employer contribution.Special Rules for Leveraged ESOPsIn C corporations only, leveraged ESOP sponsors are allowed to contribute and deduct up to 25% of eligible pay to cover principal payments on the ESOP debt. Interest is fully deductible. Aside from deduction limits, there is a separate limit on annual additions to employee accounts. In leveraged ESOPs in C corporations, interest and forfeitures do not count towards the limits for &#34;annual additions&#34; to employee accounts, but these special exceptions apply only if not more than one-third of the contributions are allocated to highly compensated people (&#34;highly compensated&#34; is defined by law and explained in the section &#34;Highly Compensated Employees&#34;). In addition, no one can get more than $72,000 in 2026, a figure to be indexed for inflation in $1,000 increments annually. In a 2004 private letter ruling, the IRS concluded that this 25% of pay limit is, for an ESOP in a C corporation, in addition to contributions by the company to other qualified plans. If a company maintains another defined contribution plan, the contribution limits for each plan count separately, so, for instance, a company could contribute up to 50% of pay. This only applies to leveraged C corporation ESOPs, however.In S corporations, interest payments and forfeitures do count toward the maximum individual allocation limits.C corporations can go beyond the 25% limit, however, by paying &#34;reasonable&#34; dividends on the ESOP shares. These dividends are normally paid on all shares, allocated and unallocated. (Dividends can also be passed through directly to participants, but doing so does not raise the contribution limit because dividends are paid to employees, not the plan). &#34;Reasonable&#34; has never been legally defined, but most practitioners believe it means within the range paid on comparable classes of stock in similar companies, must be capable of being paid regularly, and must not result in unreasonable compensation. The dividends must be included in alternative minimum tax calculations.For more information, See Understanding ESOPs.