Contribution calculation

[Guest amybu99]

I have a employer (doctor with his own practice) who sponsors a profit sharing plan. Half way through his 2001 plan year (calendar year) his practice was merged with a local hospital who sponsors a 403(B) plan. He was the only employee that received income from his practice during the entire plan year. Am I correct in calculating his maximum discretionary contribution to the profit sharing plan as 15% of eligible compensation less 403(B) employee contributions?

[Guest Yanikoski]

You should calculate the contribution amount twice, first WITHOUT regard to the hospital income and 403(B) plan at all, and second taking into account the combined income and (as you suggest) the 403(B) plan. Whichever amount is LOWER is the correct limit for the profit sharing plan. This strategy reflects the general rule that in this kind of case (where there is a plan through self-employment) the plans must be aggregated, but you cannot INCREASE the limit for the plans separately via the aggregation process.