Guest jim williams Posted April 28, 2004 Posted April 28, 2004 We have a client who is 100% owner of two separate medical practices. Both practices have safe harbor 401(k) plans incorporating the 3% NEC. The doctor earns $45,000 in practice 1 and $400,000 in practice 2. It is my understanding that the doctor's compensation for each practice when calculating the 3% NEC is $200,000 (2003 plan year). He would receive a $6000 safe harbor contribution in each plan. Any thoughts?
Blinky the 3-eyed Fish Posted April 28, 2004 Posted April 28, 2004 What does your document say? "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
Guest jim williams Posted April 29, 2004 Posted April 29, 2004 The document states Compensation as that which is paid by the Employer and any affiliated employer that adopts the plan. Since neither practice adopted the other's plan, I can interpret this to mean that I would not aggregate the compensation of the two practices? The document also states that Earned Income on behalf of sole proprietors and partners who control more than one business would only be considered for the entity that adopted the plan. However, these practices are corporations not self-employed.
Blinky the 3-eyed Fish Posted April 29, 2004 Posted April 29, 2004 The language seems pretty standard and I would agree with your interpretation to not aggregate the compensation for allocation purposes. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
WDIK Posted April 29, 2004 Posted April 29, 2004 I am most likely missing something simple, but I am confused. With the Dr. earning $45,000 in Practice 1, how do you arrive at $6,000 SH contribution for that plan? ...but then again, What Do I Know?
Blinky the 3-eyed Fish Posted April 29, 2004 Posted April 29, 2004 He changed his mind on what comp to consider. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
WDIK Posted April 29, 2004 Posted April 29, 2004 But isn't jim saying he can make a $6,000 contribution to each plan, for a total of $12,000? ...but then again, What Do I Know?
Lame Duck Posted April 29, 2004 Posted April 29, 2004 I'm with WDIK. If the compensations cannot be aggregated, the plan compensation for Plan 1 is $45,000, and the 3% NEC would be $1,350. For Plan 2, with a compensation of $400,000 ($200,000 eligible) the 3% NEC would be $6,000. The total NEC for both plans would be $7,350, not $12,000.
Blinky the 3-eyed Fish Posted April 29, 2004 Posted April 29, 2004 He changed his mind. By doing so, there is a disconnect between his 2 posts. In other words don't read post 1 and conclude his current position. Ergo, disregard post 1. In conclusion, I would like to address that post 1 should not be factored in to future comments about the level of contributions. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
WDIK Posted April 29, 2004 Posted April 29, 2004 But what about what he said in his first post? ...but then again, What Do I Know?
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