Maximizing 401(k) PS contribution for one person S-Corp

[Guest dhoefer]

I have been working with an individual who has their own company, an S-Corp. We are trying to maximize his contributions to a 401(k) Profit Sharing plan and based on my analysis, in order for this person to contribute the maximum of $40,000 ($11,000 deferral and $29,000 profit sharing contribution), he has to take a salary of $116,000. Does that seem right or is there a way for him to take a lower salary and still reach the $40,000 contribution level?

Thanks.

[Guest pensionadmin]

Yes, I think you're right. Max deduction is 25% of participant payroll. Sole participant makes $116,000. 25% = $29,000.

[Earl]

and tell the guy that it has to be W-2 not K-1 so you don't have to tell him next February.