ldr Posted February 9, 2018 Share Posted February 9, 2018 We have a client who owns two companies and both have employees including himself. One is a corporation; the other is a LLC. He has W-2 wages of about $190,000 from the corporation and over a million from the LLC. Both companies are adopting employers to the same retirement plan and all employees are covered for both entities. Question: In calculating the maximum benefit he can have for 2017, are we allowed to use both his W-2 wages plus enough K-1 income to get him up to the maximum we can take into account for the year of $270,000? Our gut reaction is "yes" but one of us has some doubts. We are grateful for any help! Link to comment Share on other sites More sharing options...
ldr Posted February 9, 2018 Author Share Posted February 9, 2018 Sorry, I realized I wasn't quite clear. One company issues him a W-2 for $190,000 and the LLC issues him a K-1 for the million dollar income. Link to comment Share on other sites More sharing options...
jpod Posted February 9, 2018 Share Posted February 9, 2018 Are you talking about a K-1 from the LLC? First point to note is that if he is the sole owner of the LLC there would be no K-1; you would look to his Schedule C. If there is a K-1 then he must have one or more partners. Second point, is the Schedule C or K-1 income earnings subject to self-employment tax? If not then it can't be eligible compensation. Third point, does the plan definition of "compensation" include self-employment income? Link to comment Share on other sites More sharing options...
ldr Posted February 9, 2018 Author Share Posted February 9, 2018 @jpodExcellent points and I don't know. I am asking on behalf of a colleague who actually has the details. I will find out and get back on this. Link to comment Share on other sites More sharing options...
Mike Preston Posted February 9, 2018 Share Posted February 9, 2018 If it is an LLC taxed as a corporation, and the corporation is taxed as an S-Corp, then none of the K-1 counts for pension purposes. Link to comment Share on other sites More sharing options...
ldr Posted February 9, 2018 Author Share Posted February 9, 2018 @jpod - There are no partners so it is Schedule C income, not K-1, as you said. The income is subject to the self-employment tax. The plan compensation definition includes self-employment income. As per my colleague who brought this up in the first place. :) Link to comment Share on other sites More sharing options...
Lou S. Posted February 9, 2018 Share Posted February 9, 2018 In this case with the facts you describe you aggregate the compensation from both and then limit it for 401(a)(17). Link to comment Share on other sites More sharing options...
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