Profit Sharing Plan and SEP

[Lori Foresz]

Hi,

Trying to find the answer, but struggling.

Doctor participates in medical corps PS plan and is a 14% owner.

Also receives directors fees for a nursing home and established a SEP for his Schedule C income.

Doctor received $40k in the corps PS plan and is told he can't made a SEP contribution because he has already maxed his 415.

I'm thinking that would be a separate 415 limit since the two businesses are not in a controlled or affiliated group.

I know the SE rules get kind of tricky. Can anyone help?

Thanks so much.

[Gary Lesser]

Doesn't appear that 415 applies in the aggregate. Individual does not appear to be in "control" of more than one entity. The limit for 2004, however, was increased to $41,000 (plus catch-ups) and the plan can consider up to $205,000 in compensation.

[Blinky the 3-eyed Fish]

Gary, the $41,000 annual addition limitation applies to limitation years ending in 2004. The $205,000 401(a)(17) limit applies to compensation periods beginning in 2004.

So I think you are 1 year off. [Thanks Blinky. I have corrected my adjacent post by replacing 2003 with 2004.

It should be pointed out that many/most plans use the plan year to determine compensation. If a plan determines compensation used in determining allocations or benefit accruals for a plan year based on compensation for the plan year, then the annual compensation limit that applies to the compensation for the plan year is the limit in effect for the calendar year in which the plan year begins. Alternatively (as you point out), the compensation period method (nice phrase, thanks ) may be used.--gsl]