Jump to content

Question #65 test 12/04/97

Guest Jhagan

Recommended Posts

Guest Jhagan

What is the maximum deductible discretionary profit sharing contribuiton the meployer may make for 1997?

- ER sponsors a money purchase and a 401(K)

-Employer's tax year and both plan years are calendar years.

- money purchase contribution = 5%

- Profit sharing plan provides for employee elective salary deferrals, a matching contribution equal to 50% of each employee's deferrals and a discretionary profit sharing contribution.

-NO forfeitures in 1997

Employee, 97 gross comp, 401Kdeferrals, 401 K match:

A, 200,000, 8,000, 4,000

B, 100,000, 5,000, 2,500

C, 30,000, 0, 0

D, 20,000, 2,000, 1,000

Answer is $22,950


Link to comment
Share on other sites

1. Reduce gross comp by salary deferral since 404 still based on "net" comp.

2. Apply 401(a)(17). This is done after step one so A has net comp of 160,000. 404 "Net" comp = $303,000.

3. 15% of $303,000 = $45,450.

4. Subtract salary deferral and match. $45,450 - $22,500 = $22,950

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Create New...