kckid

John, Thanks for the response. I'll follow-up on PM around your suggestion. Mods, Please close this topic. I don't appreciate being belittled and talked down to within this topic. I tired to be decent and respond with what I thought was the information being requested. Sorry if I don't understand the scope of what was being requested. I answered what I thought was relevant. Somehow that gap never got narrowed. I do appreciate the suggestions and private PMs of those who have responded. Moving on...

That would take time I'm not willing to provide anymore for someone of your character. End of conversation...

I'm just trying to confirm some things I had seen. Wow for being the "sitewide" moderator, you sure are an complete rude mule. It was an exploration request, looking for confirmations of my theories. Again I'm just flat out shocked they let someone like yourself be a mod, let alone a "sitewide" mod (oh that sounds so important doesn't it). I've filled a complaint about yourself to the business management via the contact form. Good luck.

Mike again thanks for the reply. Trying to keep this civil and the sarcasm at a minimum. I'm not expecting anything from what I've helped with for employees in the past. Been screwed a few times but that's life. It's nice to be there in a reasonable way when someone gets into a bind. There is disappointment in the limitations of what's acceptable in the 401k rules. Especially around after-tax contributions. Seems pretty silly to penalize people for living within a reasonable budget and not running up their bills to meet or exceed their paychecks. They should encourage investing not discourage it but by dragging those who are frugal down to the level of those that are not... well that's just our backwards "fairness" society that we live in today. It's only fair that everyone purchases a car every 5 yrs or leases a lexus to look good. Guess that's why I'm driving a 2008 Civic with 165k miles and my prior was a 10yr old Civic with 225k miles on it.... but I digress. Back to the point here. So my best 401k option here is a SH matching contribution with the understanding most would not contribute. With 18k each from the owners and an approx. match of 2.5k each. Next option is a PS option in the plan but I've looked at the numbers. Just wanting to make sure I didn't miss anything. If I raise the salaries of the owners to 200k each and at a 15% PS, it would max out the owner 401k contributions. Well with that 15% to owners it would be 15% to everyone else. So that's approx. 50k to everyone else. Let's see... owners PS is 62k (total) and the remaining employee PS 50k (total). That might as well be a 55% tax (on the original 90k outlays). Now add the additional fica/futa taxes for a 200/400k payroll to owners from s-corp distributions (additional 14k in taxes). Now for the owners to put away 68k, it's 50k to other employees and 14k to additional fica/futa. Pay out 64k to put away 68k pre tax... This would be taxed at some point later, so that needs to be factored into the equation. Let's say 10% because the numbers are already getting absurd. Slap another 6.8k into the mix for reality purposes. Now pay out 70k to put away 68k pre tax. Maybe I'm missing something but... paying out fed and state taxes on a s-corp distribution seems like a much better financial decision to me. That's what I meant by "Yes, but to the point of balancing fica, futa, fed and state taxes on salary vs. the current salary and s-corp distributions above that for the same items." I see now that it might not have been clear but I figured the peeps around here would have read between the lines a bit.

Didn't realize I wasn't answering, maybe I wasn't clear enough so I'll try again. #1. Owner salaries are approx. 125k yearly or 62,500 each owner. S-corp distributions are approx. 300-400k yearly or 150k-200k each owner. The original idea was to setup a 401k with employee distributions and employer match using SH. (good) Then do employee after tax contribution to the 401k up to the 52k cutoff. After research have found out that after tax contributions would not be covered by SH and it would cause a failure of the ACP test. (bad) I explored the option of PS and comparability testing. That would bring too much funding into employee accounts vs. the owners. (bad) #2 Not a fool... but thanks. I know most are living check to check. Last attempt I had zero interest in the plan, hence the failure when the SH was not done. Trying to do it different this time and understand more. If I'm expected to be a plan admin, I need to better understand the in's and out's. Additionally the employee's have a "cost" and this cost is taken into account with raises. Enough said...#3 Makes sense but that assumes the rank and file understand and can live without that money for an extended period of time. Basically everyone has their existing budgets, so deferring income in a significant way would pose a financial hardship.#4 My comment was about living expenses being 38k combined for the owners. That would approx. for each owner, 69k (salary) - 18k (deferral) = taxable income (fed / state) - 32k (post tax deferral) = 19k left over for living expenses for each owner or 38k combined. I can justify the daily living expenses against the remaining salary. The IRS can come play the "you're not paying yourself a reasonable wage" game all they want. I work full time, the wife part time (10%). An average of 50% of both is completely reasonable and actually a bit high when combined together to average out.Bit of a soap box here, just want to make sure I'm not looking like an evil employer. People are paid well, I don't bring in foreign workers (a miracle nowadays) to replace them like other businesses around me. In fact in one client, we are the LAST American workers in the IT group. I don't have turn over and multiple people have 10-13 years of working together in the company (prior 1099 status + current W2). I've purchased cars for people and deducted from wages for 5 yrs. Provided short and long term loans to help people close on houses, purchase property and bailed people out of jail lol. I usually take the crappy work shifts and am the first to work the weekend so others have the time off. Just looking to explore my options to make sure I'm not leaving anything out of the equation. I've gotten confirmation on this over PM (Thanks!). Sounds like my next option would be some type of defined contribution plan... does that make sense? Hoping for a bit more of a civilized response.

Mike, First thanks for the reply. See additional details below... let me state that this year the profit of the company (including owner salaries) will be somewhere between 400-500k. That's a heavy hit for state and federal taxes percentages. It's a peak in the business this year and next and since I have everything paid off personal wise and run everything out of cash flow (i.e. no business loans), I'm looking to retain as much as I can using the preferred structures: Pre-tax deferrals (401k) Company match (401k) Post-tax deferrals (rolled into a Roth 401k) w/o post-tax capital gains Post-tax investments w/ post-tax capital gains In a perfect world, how much of your current income would you want to go into a plan?My thought was to "up" the owner salary to 70,000 of which 52,000 would go into the 401k. With everything paid off, we only need about 36k in leftover salary to meet living expenses. Don't really care about a PS or match. PS seems to be out due to the high salary of the employees. 18k pre-tax 34k after-tax What is the high 3 year compensation average for the owners?My number was incorrect for the 50,000 owner (thought I fixed that). It averages 60k/yr/owner. 62,184 Y Owner 51 9/13/1971 1/1/2000 18000 Y 60,000 Y Owner 49 2/19/1976 1/1/2000 18000 Y Are the numbers above for 2015 or are you asking these questions with respect to 2014?2015, didn't think I had an option for 2014 at this point. Is the owner compensation flexible?Yes, but to the point of balancing fica, futa, fed and state taxes on salary vs. the current salary and s-corp distributions above that for the same items. Does your employee cost have to be the same percentage of pay or are you willing to have some employees get one amount and other employees get less?I would like to limit the amounts given to employees. I pay a decent salary and giving an additional 5% to someone making 100k+ a year would be a non-starter and cost significantly into operating costs and margin (i.e. 20% -> 15% on the 100k person). What are the circumstances that lead to five of your employees being listed with 1/1/xx as their hire dates?Two of them have wrong dates I noticed now. At the beginning of 2006, I changed the resources from 1099 to W2. So they were officially "hired" at that point into the company. 110,768.00 Y Employee 0 7/29/1971 1/1/2006 0 N 75,573.00 Y Employee 0 6/7/1972 1/1/2006 0 N 75,266.00 Y Employee 0 11/3/1979 1/1/2006 0 N

Hi everyone. I've been reading this board for some time. This stuff is even more complicated than taxes :/ So I've been trying to figure out a plan to maximize owner retirement options. I've been burnt in the past in a prior 401k through ADP because no one else contributed and I thought that would not be an issue. Needless to say, having 36,000 kick back was a hard lesson. We are setup as an S-corp. Owners work part time.... other employees don't seem interested in contributing. What are my options? I'm open to discuss with a "professional" but I like to validate what I'm being told vs. what the pro may or may not understand. I have figured out this so far: 1. 401k pre-tax with safe harbor match (18k each + 2.5 match each) 2. 401k post-tax contributions I cannot do, since that would trigger an ACP test that safe harbor would not cover I really wanted to max out the 401k post-tax and roll it over to a Roth IRA but looks like I cannot do this. 3. Personal Roth IRAs assuming the married filling jointly AGI is not exceeded. 4. Some type of defined contribution plan (prefer something Roth based since the money contributed it post-tax). 5. Other ideas? Does seem like PS will work in the 401k plan because the ages are very close and the salaries are fairly high. Thanks for any ideas or input. A bit bummed that since everyone else doesn't want to contribute, the I can't do much either. All my bills are paid, so the salary is pretty much option to defer but I'm limited in what can be deferred. W2Earnings >1000 hrs/yr Class PercentOwned BirthDate HireDate Projected Deferral Related 62,184 Y Owner 51 9/13/1971 1/1/2000 18000 Y 50000 Y Owner 49 2/19/1976 1/1/2000 18000 Y 110,768.00 Y Employee 0 7/29/1971 1/1/2006 0 N 75,573.00 Y Employee 0 6/7/1972 1/1/2009 0 N 75,266.00 Y Employee 0 11/3/1979 1/1/2009 0 N 74,472 Y Employee 0 11/5/1975 7/1/2013 0 N 32,688 Y Employee 0 3/27/1993 12/1/2014 0 N 30,000 Y Employee 0 9/19/1993 12/1/2014 0 N 49,992 Y Employee 0 3/20/1972 1/1/2014 0 N 15000 N Employee 0 9/3/1950 2/1/2014 0 N 15000 N Employee 0 2/23/1958 11/15/2013 0 N 8000 N Employee 0 2/24/1959 1/1/2015 0 N