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Question #31 06/98


Guest Jhagan

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Guest Jhagan

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?

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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).

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