SARSEP calculation under JCWAA

[Guest mhalvor]

With Respect to SARSEPs, in a plan that makes 5% of salary automatic contributions each year, what is the maximum deferral percentage for an employee under the JCWWA law? Specifically, can an employee who is earning, say $44,000, defer 25% of their pay up to $11,000?

[Gary Lesser]

For more information see message entitled JCWAA Amend EGTRAA.

5% of $44,000 = $2,200

(.25 - .05) / 1.25 x $44,000 = $7,040

$7,040 (elective) + $2,200 (employer) = $9,240

Proof: ($44,000 - $7,040) * .25 = IRC 402(h) limit = $9,240.