Maximum benefit at minimum salary

[Guest Ed Walker]

415 limits maximum including 401(k) to $40,000 that I got.

If I want to maximumize benefits a lowest salary I think the maximum 415 benefit is 100% of pay including deferals -Right?

Therefore if I pay $14,666.66 to employee and she defers 11,000 and the company can contribute 25% of total salary or 3,666.66

If we pay any less and she defers 11,000 the company cannot contribute the full 25% without violating 415.

I think I got it right - just need somebody to confirm for me

Thanks

[Blinky the 3-eyed Fish]

Correct. However, if she is 50 or over, she can defer another $1,000.

[Tom Poje]

Algebra 101

where x = salary

y = 415 contrib = .25 x

but

x = 11,000 + y

x = 11,000 + .25 x

.75x = 11,000

x = 14,666.67

now, solve for next year's compensation!

[Brian Gallagher]

Just a tiny aside...

If she is over fifty, she can defer an additional $1000 if and only if the plan allows it. Plus there may be a match on it...

[MGB]

Brian,

It is my understanding that the match on the catch-up contribution would not be allowed in this situation because the person is already maxed out on 415. Only the catch-up contribution is exempt from 415, not the match.

[Mike Preston]

Keep in mind that the match is not exempt from ACP testing, unless the match is a safe-harbor. Therefore you would want to look at the document to see what gets cut back, the match or the employer contribution. It may have an impact on a4 testing.