Guest DCarter Posted February 19, 1999 Report Share Posted February 19, 1999 We have a SARSEP IRA to which the employer contributes 3% to meet top heavy and HCE requirements. What is the maximum salary reduction that can be contributed by the employee? It would seem to be straightforward, however, everythme I read Form 5305A-SEP and Publication 590, I get more and more confused. For instance: Publication 590 says on page 52, under Limits on Deferrals, "..the total income you can defer under a salary reduction agreement... is limited to 10,000. This limit applies only to the amounts that represent a reduction from your salary, not to any contributions from employer funds." But then underOverall Limits on SEP Contributions, it says: Contributions, including elective deferrals (salary reductions), made by your employer to the SEP-IRA are subject to the overall limit of 15% of your compensation or $30,000, whichever is less." I interpret this to mean that in the case of Joe, who earns $70,000 a year, is eligible to defer the maximum of $10,000 (70000 x .15 = 10500) max is 10000, that is what he can defer. The employer then makes a total contribution of $2100. Am I interpreting this correctly? What if the employer wants to increas his percentage to 5%? Is that permitted? Please advise. Regards, ------------------ Darlene Link to comment Share on other sites More sharing options...
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