Jhagan
May 30 1999, 12:20 PM
What is Part. A allocation of ER contribution for 1997?
-profit sharing plan
-Calendary year
-top heavy
-all eligible participants, including key-employees, are entitled to receive the top-heavy minimum contribution
-Maximum permitted disparity allowed by IRC 401(l)
-Integration level is TWB for 97 $65,400
-ER contribution is $9,500
Part, Key Employee Status, Gross comp
A, Key, 150000
B, Key, 98000
C, Nkey, 15000
Answer is $5,662. Help?
Alan Simpson
Jun 2 1999, 10:05 AM
The answer is as follows:
Each participant receives 3% of eligible ompensation off the top. (A gets $4500, B gets $2940, C gets $450 totaling $7890).
Reduce the contribution of $9500 by the aloocated $7890 levaing $1610 to be allocaed to the participants with income above $65400 (TWB). Participant A's income above the TWB is $84600 and Participant B's income above the tWB is $32600. Making the income that the $1610 is to allocated against at $117200.
Divide the $1610 by $117200 to receive a factor of .0137372. Multiply this by the participants income above the TWB (A gets $1162 rounded ($84600 * .0137372). This is then added to the 3% contributions making the allocation to Participant A at $5662 ($4500 + $1162).