richard Posted July 27, 1999 Share Posted July 27, 1999 Let's say a company has 2 divisions, Division A and Division B, each with a $1 million payroll. The company has a defined benefit plan which costs 20% of payroll covering only employees of Division A. The company has a defined contribution plan which costs 10% of payroll covering employees of both divisions. The total contribution is $400,000, as shown below. Division A - $200,000 cost for DB, $100,000 cost for DC. Division B - no cost for DB, $100,000 cost for DC. What is the company's total deduction? 1. $350,000 ($250,000 for Division A, because Division A's deduction is limited to 25% of $1 million), plus $100,000 for Division b), with $50,000 carried forward to next year. OR 2. $400,000 ($300,000 for Division A plus $100,000 for Division b), since the total deduction is limited to 25% of the total payroll of $2 million. Link to comment Share on other sites More sharing options...
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