Another integration question

[Guest Moe Howard2]

Does anyone know of a website or article that has the equation (or steps) for computing the maximum PSP contribution for a "sole proprietor owner", when the sole proprietorship has employee participants (in addition to the owner)? The plan is top heavy, integrated at 100% TWB, and the owner's income from the business is below $200,000.

I've computed contributions for for integrated corporate plans before, so I'm a little familiar with integration. I've also computed contributions for self-employed employer plans without integration (ie: if employees get 10% ....then owner can only get 1/1.10 = 9.909%).

But combining the rules of "integration" and "self-employed owner" together sounds difficult.

Thanks.

[jevd]

TRY THIS

http://benefitslink.com/cgi/integ.cgi

[Guest Moe Howard2]

jevd: the website you referred me to only computes the contribution for corporations. My question is in regards to a sole-proprietorship (self employed).

[No Name]

Yo Mo,

I think you can fool around with this spreadsheet to include integration and find your answer. Try fiddling with the MP column.

www.pensionalysis.com/dc_keogh.xls

[R. Butler]

I don't know of any articles. You are going to have to run through the circular formula.

1. Beginning point is Sch. C income prior to any retirement plan deduction.

2. Run an allocation based on Sch. C income in #1. SKIP TO STEP #4

3. Run an allocation based on Net Earned Income from Step #7

4. Take Sch. C from #1 reduce by allocation contrib. to rank & file

5. Calulate SE tax on adj. Sch. C from Step #4

6. Reduce Adj. Net C in Step #4 by 1/2 SE tax calulated in Step #5 and by the allocation to the sole proprieter.

7. The Result is net earned income. You go to Step #3 & repeat this formula until you get a repetitive net earned income figure here.

Hope this helps.

[Tom Poje]

you get what you pay for.

no instructions provided for this spreadsheet, if you are targetting a certain $ amount for the contribution modify the % in dark green and see what appears in total contribution.

absolutely no guarantees on this. I don't recall if there were problems if the comp ended above the $ limit, but I thought I had ironed out most of the problems.

But then, remember, at times I'm an idiot doing stuff like this.

edited: now I remember, it won't cap at the $40,000 limit

[Guest Moe Howard2]

R. Butler: Thanks, but what you explained is only half the puzzle. You explained how to compute the owner's eligible compensation ... but what about the integration ?

I guess my main concern is:

Let's say that the owner contributes 10% of employees' comp. Since he is self-employed, then the max he can contribute for him self is 9.0909% of his eligible comp. [so far no problem]. However, if the plan is integrated ...then the owner might wind up having contribution of more than 9.0909%. Since the whole prupose

of integration is for the owner's % contribution to be more than the employees' % .... this conflicts with the fact that owner is limited to 9.0909%.

Question: If employees' allocation is 10% of their eligible compensation, then how can employer's allocation ever be more than 9.0909% (even with integration)?

I thought the whole purpose of integration is to give owner a higher % than employees. (Why even attempt to integrate a self-employed plan if owner's % is limited from the start)?

[R. Butler]

R. Butler: Thanks, but what you explained is only half the puzzle.  You explained how to compute the owner's eligible compensation ... but  what about the integration ?

I guess my main concern is:

Let's say that the owner contributes 10% of employees' comp. Since he is self-employed, then the max he can contribute for him self is 9.0909% of his eligible comp. [so far no problem].  However, if the plan is integrated ...then the owner might wind up having contribution of more than 9.0909%. Since the whole prupose

of integration is for the owner's % contribution to be more than the employees' % ....  this conflicts with the fact that owner is limited to 9.0909%.

Question: If employees' allocation is 10% of their eligible compensation, then how can employer's allocation ever be more than 9.0909% (even with integration)?

I thought the whole purpose of integration is to give owner a higher % than employees.  (Why even attempt to integrate a self-employed plan if owner's % is limited from the start)?

You are calculating the integration in Step #2 & #3. You have to calculate the contribution based on the plan's formula using the NEI from Step #7.

I am unaware of a simple algebraic formula that will get what you want.

The spreadsheet Tom Poje posted might give you what you want. If it doesn't & you want to post the plan's contribution formula, I don't mind e-mailing you a spreadsheet that is taylored to that plan formula. (I am currently working on my making my own self employed calc. program, but thus far for integrated plans I've only put in a basic 4 step allocation formula. I just manually change when I need something different.)

[Tom Poje]

ok, modified slightly to take into consideration the 415 $ limit, and then added a field to enter desired plan contribution amount. after you make an initial % guess to run, it will suggest an amount.

of course it wont work in every case, but looked like it was working if owners contribution is less than the $ limit.

[jevd]

Moe Howard2

He has probably already received a lot of requests, but i e-mailed Dave to see if he could include a calculation for the self-employed plan.

[jevd]

Moe Howard2

Dave provoided me with this information.

Gary Lesser has a calculator

http://benefitslink.com/GSL/QPSEP_profile.html

[Guest Moe Howard2]

Tom, great spread sheet.

I follow how you computed the partner's eligible comp of $277,061.85, but I'm having a problem with your contribution of $29,289.

It is my understanding (since he is self employed) that his max contribution can be no higher than the lower of (even with integration):

$200,000 x 11.424% = $22,848

OR

$277,061.85 x 10.2527% = $28,406

[note: X / 1.X = 11.424 / 1.11424 = 10.2527]

I'm sure that you are correct. I'm just not thinking right. My belief that integration can't be used to increase the X / 1.X limitation for self-employed participants may be unfounded. But I have a hard time believing that the limitation on self-employed contribution is completely void just because the plan is integrated.

Can anyone help me see the light?

[Bird]

Moe, I may not be getting the full picture since you didn't post any numbers (and if you want to do that I would be happy to run them through my own spreadsheet as an exercise), but...

It seems to me that if you're looking at self employment income of $277,000, and he only has a couple of employees, that his net taxable income after all deductions will be greater than $200,000 and you should just use $200,000 as if it were W-2 income.

I don't see the relevance of any percentage calculation that uses $277,000.

[Guest Moe Howard2]

Bird: I can tell from your response that you are not familiar with self-employed plans.

[Blinky the 3-eyed Fish]

Bird: I can tell from your response that you are not familiar with self-employed plans.

No, Moe, what Bird says makes sense. It is you that needs to become more familiar so you understand his/her point.

[R. Butler]

I also see Bird's point.

Is this a straight profit sharing? Its indicated in the initial post that the owner wants to max out. If the owner's Net C (after contribs. for rank & file) is over $200,000, unless he has 401(k) deferrals or a large amount of reallocated forfeitures, its difficult for me to imagine that he couldn't get $40,000. I do know that a plan could contain an allocation formula that has the effect of limiting contribs. to the owner, but it justs seems unlikely in the case of a sole propreiter.

[Guest Moe Howard2]

Blinky, usually you are right on the mark ... but this time you are full of crap.

Anyone who does not realize the relevance of using self-employment income (less 1/2 SE tax) when it is in excess of the $200,000 415 limit simply is not familiar with computing maximum contribution for a self employed participant.

[Blinky the 3-eyed Fish]

Where's Mike Preston? I need a wow! So Bird, Butler and I are full of crap? You sure you want to get so aggressive when you really don't understand this simplistic calculation and you really don't understand Bird's point. I would explain it to you, but I really don't want to. I will leave you to your ignorance.

Oh, by the way, when you do discover the error of your comments, ask yourself the question if you like apples.

[AndyH]

Beautiful, Fish backing up Bird. Where else could this happen?

[Tom Poje]

The last few pages of Publication 560 (p21 - 23 of 2003 Publication) is a deduction worksheet for Self-Employed.

While it doesn't 'provide' a chart for an 'integrated' rate (the table is a flat %) I believe you simply would make an adjustment on an individual basis to take integration into consideration.

The instructions simply say 'plan contribution rate' and in the excel sheet the rate

was 11.424% plus 5.7%>twb.

I would hold that is the rate (That rate would vary depending on how much comp one has once above the TWB)

in other words, on the excel sheet the contribution was 29,289 and comp limited to 200000 so the plan contribution rate (for this individual) was simply 29289 / 200000 = 14.6445%

[R. Butler]

I do now see where Moe his getting those numbers, they aren't his numbers they are off your spreadsheet.

One question about the spreadsheet. If the excess % is 5.7%, why is employee #2 getting an integrated contrib. of 1.71 & not $171.00? I was just looking at it & trying to see how it worked.

[Guest Moe Howard2]

Blinky: I never mentioned Bird nor Butler in my post to you.

[Blinky the 3-eyed Fish]

It was crap by association. If all I am doing is seeing Bird's point and so is R. Butler, then you can't call me full of crap without calling them full of crap too. I didn't add any new comment, you just didn't like how I said it.

When you get some experience and see the point, I will accept your apology. I think I better go Dom on the rest of this post or I may get in trouble. (That was for you Andy.)

[Tom Poje]

as noted, spreadsheet could be in error. I threw the calculation 'for others' together in a hurry. it is multiplying by a 'percent' and then dividing by 100. obviously, that should be corrected! interestingly enough, I must have discovered the problem, made a the correction to cell k13, but not copied for k14 - k22.

try making the correction, then look at the suggested base % to run and try that. looks like it works.

my apolgies for not spotting the error.

[Bird]

Thanks to Blinky and Butler for backing me up.

Moe, you started out saying that self-employed income was under $200,000, then there was a reference to $277,000, so I don't know what the actual scenario is. As I stated earlier, I would be more than happy to take 30 seconds and run actual numbers through my spreadsheet and post them here for peer review. If I'm doing something wrong I'd like to be educated.

I wouild be especially interested in learning about using comp in excess of the, um, 401(a)(17) limit directly in an allocation calculation.

[Guest Moe Howard2]

Bird: My post regarding the $277,000 was to Tom. It was in response to his spread sheet from his previous post. My post to him clearly says "Tom" and it clearly refers to his spread sheet.

If you want proof that self-employment income in excess of the $200,000 401(a)(17) limit plays a role in computing self-employed person's contribution to a plan ... then look at IRS publication 560 Mentioned by Tom). Page 21 has worksheet for a self-employed's maximum deduction contribution. Look at lines 3, 5, and 7. You will see that the max contribution is the smaller of [1]all SE income (even if higher than $200,000) times a % or [2] $200,000 times a %.

I was correct when I stated earlier that you are not familiar with contributions for the self employed.

In my initial post, I was asking for an article or website that explained how a SE participant's contribution is computed when the plan is integrated. Why did you even reply to my post if you knew of no article or website? Sometimes it's just best to remain silent. Now you and Blinky are all upset, your feeling are hurt, and I have done nothing wrong.

[Tom Poje]

Before people say stuff they shouldn't, etc, etc.

I actually have some extremely old and brittle notes that go back to 1991 that, as far as I can tell, talks somewhat along the lines of Moe (e.g. grossing things up, etc.) but back then there was a medicare cut off level, which was done away with years ago.

I vaguely recall a change being made to the software (Pentabs) when the medicare cut off was removed.

In other words, I think the calculation was done along the lines of what Moe is talking about at one time. (I could be wrong)

And a big reminder: The excel sheet I posted did have at least one glaring error, but easily fixable, as indicated in an earlier post.

[Blinky the 3-eyed Fish]

All Bird was saying is that with $277,000 in comp and only a few people, that after the reductions for the contribution to both the ancillaries, the sole proprietor and 1/2 of the SE tax, that it would be unlikely that the final EI would go below $200,000 because there were only a few people in the example. That is all that was being said and I understand what was referenced was Tom's spreadsheet.

Is that not true Moe? So calling people full of crap when you don't understand the comment is not wrong? Wow!

[Bird]

Sigh. I'm not sure what I said to incense you but I'm sorry for...whatever.

Bird: My post regarding the $277,000 was to Tom. It was in response to his spread sheet from his previous post. My post to him clearly says "Tom" and it clearly refers to his spread sheet.

I understand that but the thread started out with an example where SEI was under $200,000 and was simply commenting that I didn't know what the actual situation was. But, if we're talking about a situation where SEI is $277,000 before any contributions, and you only have a couple of other participants and they're not getting too much, net earnings after contributions will be over $200,000 and you can just use the $200,000 limit in your calculations, just as if it was W-2 income. I don't know how many different ways that can be said, but it's true.

FWIW, I don't use the IRS' silly little table. The deduction for 1/2 of self-employment tax, the deduction for employee contributions, and the deduction for the owner's own contributions are all built into the spreadsheet that I use, and I get an answer more-or-less directly.

I was correct when I stated earlier that you are not familiar with contributions for the self employed.

In my initial post, I was asking for an article or website that explained how a SE participant's contribution is computed when the plan is integrated. Why did you even reply to my post if you knew of no article or website? Sometimes it's just best to remain silent. Now you and Blinky are all upset, your feeling are hurt, and I have done nothing wrong.

You asked for an article in your intitial post and 11 posts later, after going into some detail, you asked if someone could enlighten you. Sorry for trying to help; I just thought if you needed a shortcut that might have some value. If you still want an article, Larry Starr presented an excellent outline at one or more ASPA conferences in the early-to-mid 1990s. Maybe someone can dredge up a copy. The bottom line is that if you want to do an integrated plan for a self-employed person, you have to guess at earned income after contributions, and then do a calc to see if you come up with the (same) contribution. (That's an attempt at a short explanation so don't jump on me.) The only practical way to do it is in a spreadsheet, although I guess admin programs might have that functionality. Frankly, I don't trust them unless I can duplicate the results myself. I think you can set up an Excel spreadsheet with a circular reference for the earned income used in the allocation calc and the earned income derived after subtracting all of the deductions from your starting self-employment income, and keep hitting the recalc key until they are the same. I'm leery of using a circular reference and have programmed mine to "guess" at the net earned income and zero in until the guess equals the subtraction result.

But, you should probably ignore all that since I am not familiar with self-employment calculations.

[Guest Moe Howard2]

Bird: Sorry, but I'll have to take the IRS's word over yours.

[WDIK]

After reviewing the worksheet on page 21 of Publication 560, I think I can see where Moe Howard2 is coming from. Although I do not condone what in my opinion was at best a poorly-worded retort, it must be difficult dealing with Larry and Curly (or Shemp or Joe or Curly Joe) all day long.

It appears to me that the deduction worksheet does not cap income at the $200,000 level when applying the reduced rate of contribution, although it does later impose a $200,000 limit at the actual rate of contribution. This appears to create some strange scenarios if step 3 yields a result between $200,000 and $220,000 (the level where Bird's comments appear to kick in.)

I must also say that this is a brand new concept for me, so I would appreciate anyone pointing out the flaws in my hurried analysis.

(Edited so at to not slight the remaining stooges.)

[R. Butler]

Bird:  Sorry,  but I'll have to take the IRS's word over yours.

Bird has not posted anything contrary to IRS rules for self employeds.

You can check the truth of what is posted yourself. Bird says that since it is clear that the Net C after all adjustments will exceed $200,000, the allocation to the owner will be same as if he was W-2 employee earning 200,000.

After you make the correction to Mr. Poje's spreadsheet the total contribution on that spreadsheet is 43,168.80. The spreadsheet shows an allocation of $29,289, $3,427.20 to the guy earning $30,000 & $10,452.60 to the guy earning $90,000.

Now lets see what you come up with under Bird's post:

Owner comp. $200,000, Excess comp. 113,000 -- Excess contrib. $6,441 (this is just 113,000*.057), base contrib. $22,848 (this is just the total employer contrib. minus the excess contrib., allocated pro-rate according to comp.) Total contrib. Is $29,289

Employee #1 comp. is $30,000, no excess comp. or contrib. Pro-rata contrib. is $3,427.20

Employee #2 comp. is $90,000, excess comp. is $3,000 -- Excess contrib. is $171, the base contrib. is $10,281.60. Total contrib. is $10,452.60

Low & behold you get the same result.

I don't use the IRS table either. I would caution you on Step 1 (line 31 of Sch. C). Unless I'm missing something in that little spreadsheet they give, you can't know that number until you've gone through the circular calculation I set forth above. Notice in the example the IRS gives you there are no employees; that makes it nice & tidy. It is not always so nice & tidy when you add employees & their allocations depend on a changing Net C figure.

[GBurns]

As I caution people in all tax matters especially in return preparations, The devil is in the details. In very many cases you have to put pen to paper and do the calculations ALL the way through before any rational conclusions can be drawn. If you are following an IRS example, in a publication or otherwise, you should remember that it is not meant to be all encompassing and not even guaranteed to be correct either.

You usually have to learn this from actual experience, but luckily some can/might learn from this exchange.

[Guest Robert Garrels]

Perhaps this will be of some help to you. But remember, you get what you pay for.

You can go to my Website, www.aqsoftware.com or to Gary Lesser?s site, through the BenefitsLink directory of software suppliers, and get products that will exactly and quickly solve the problems you are discussing. My site will even offer you a demo version, available for the princely sum of $5.00, but with 2004 calculations unavailable.

All the questions you raise including the adjustments for employee contributions, ½ the owner?s self-employment tax and his own contribution are precisely calculated and handled. Integration at any level, is also handled. Adjustments your thread didn?t inquire about include a partner?s separate treatment on Form 1040 for section 179 deductions, unreimbursed expenses and the depletion deduction. Most defined contribution plan types and paired plan calculations are also available if using my software.

If you have either a sole proprietorship or a partnership with any significant number of participants or partners, you simply cannot do the calculations without employing a pretty elaborate spreadsheet approach capable of performing several hundred iterative calculations involving hundreds of separate formulas - in my opinion.

[Bird]

Bird:  Sorry,  but I'll have to take the IRS's word over yours.

Go for it. I didn't say it was wrong, just silly. I'm not looking at the worksheet now, but I don't think it said anything about integration. And after looking at it, I was sure glad that I don't need it.

[Guest Moe Howard2]

The problem with this message board is that too many people want to put in their 2-cents worth when they are not knowledeable about the subject matter.

I guess that's why some individuals have posted thousands of replys to messages in Benefitslink. It's not necessary to reply to every question presented.

I realize that Blinky may be the Boss Hog in these boards, but I would suggest that he, and others like him, follow in the steps of of Tom & WDIC who seem to have something of substance to say in their replys. Endless replys which lack substance lead to lack of credibility. No one benefits.

[Gary Lesser]

The x/1+x formula does not work in an integrated plan unless all employees earn compensation that is not in excess of the TWB. The examples in the Publications are essentially useless when ultra net compensation falls below the $200,00 limit or the plan is integrated.

Circular and inter-dependent formulas are needed with many iterations. For example, it takes 15 iterations to fully solve-for each integration level. That's about 1.3 million (circular and interdependant) calculations. Also note that the $41,000 limit is reduced if integrated. When the amount to be allocated to employee's are known the contribution allocations can be performed by hand. When the plan is designed around an employee, or is integrated, only spreadsheet software can optimize the intended results.

For 2003, with pre-plan EI of $200,000 and W-2 income of $30,000 and $90,000. Plan integrated at $87,000 (owner gets maximum at lowest cost, see below). [To favor owner and highest paid employee, use an I.L. of $8,700).]

Contribution - $59,956.56 (Base percentage of 22.5163790% and using a 5.7% spread at an I.L. of $87,000):

Owner's EI: $200,000 - $32,465.91 (Cont) - $27,190.65 (e/ee cost) - $7,708.05 (SET) = $132,635.19 (assuming no unrelated SE gains/losses). Owner gets $32,465.91.

Employees get $6,754.91 and $20,435.74.

[Gary Lesser]

BIRD IS CORRECT. Once assured that "ultra net earned income" is in excess of $200,000 (as indexed). The calculations can be performed on any "corporate-type" software program. In fact, once the "ultra net EI" number has been crunched in QP-SEP Illustrator or in Bob Garrels program (the only two programs that I know of that provide the correct answers) the ultra net earned income can be entered (up to $200,00, as indexed) into a "corporate" administrative software and the plan, thus, administered. A footnote can be used to explain why the amount of "net" compensation entered was reduced.

If anyone would like to try my 2003 or 2004 software--QP-SEP Illustrator, please send an e-mail to me at QPSEP@aol.com; subject line: "Software." It is 8.4 Meg in size. IT IS NOT PROVIDED FOR DISTRIBUTION. Bob Garrel's, see above, also has a demo available at his web site.

Bird, the only article on the subject "Earned Income in Plan Design Is More Comples Than Meets the Eye" appeared in the Journal of Taxation of Employee Benefits (May/June 1994, Vol 2, No. 1). Sent me an e-mail with your name and address and I'll send you a copy. [it wdn't fax well.]

Incidently, the worksheet gets even funkier when catch-up contributions are used. Try a SE with $15,000 in compensation. You'd be surprised by how much of a contribution can be made. The worksheet, among several defects, doesn't take the IRC 402(h) limit into account, doesn't mention that it is not suitable for an integrated plan, the reduction to the $40,000 (for 2003) SEP/HCE limit when integrated, or the contribution limit under IRC 401(d).

Also, have you ever notice the definition of compensation (on page 4) for allocation purposes and the election that can be made? Now look at the model and prototype SEPs. Go figure.

[Guest Moe Howard2]

So, maybe Gary is the logical person to ask. Well I'll just give it a try and see what he says. If I can't get an answer here I guess I'll have to give up.

Gary: In order for you to be so specific in your above reply .... you must be aware of an article, website, an IRS interpretation, or CCH analysis (something) that discusses the inegration of a self-employed plan. It seems right to assume that you were not born with the knowledge you expressed above (and I'm sure you did not make it up) ..... Can you refer me to any literature that supports your above reply regarding the X/1.X requirement is void when any participant's eligible comp is above the TWB, in a self-employed integrated plan?

A simple yes or no will do.

(I'm keeping my fingers crossed on this one. I might get an answer to my initial question). Thanks

[Gary Lesser]

Simply stated, "Yes."

(A)

There are several reasons why there are no articles on the exact point (x/1+x) you mention.

(1) It just doesn't work in an integrated plan (see "unproof" below). There are no step-rate equivalencies. So why write an article!

(2) Even if it did work, it would presuppose you knew the 1/2 of the SE tax deduction, which you wouldn't until after the non-owner contribution (or rate) was known. Since you are generally designing a plan around an owner's maximum (or specified amount) that approach doesn't work.

(B)

For example, I.L. $87,900. After all reductions (except for his or her own contribution), the owner has $100,000 of remaining earned income for 2004. The formula is 10%/15.7%. Under the "percentage" or "4-step" methods the owner gets: $9,239.15 (($90,760.85 x .10) + .057 ($100,000 - $9,239.15 - $87,900)).

UNPROOF:

(.10/1.10 x $87,900) + ($12,100 x .057/1.057) =

(.090909 x $87,000) + ($12,100 x .05392621) =

$7,990.90 + 625.51 = $8,616.41 WHICH DOES NOT EQUAL $9,239.15. QED

©

Hope this helps. I truly didn't understand how everything worked, in operation, until after I built my integrated software. I could always understand the rules, but could never find (back-in to) the result I wanted without some optimizing functions; there are just millions of combinations. Several integration levels could produce the same participant allocation, but only one of them costs the least (and so on).

I learned everything, well almost everything, I know about integration from Larry Starr. He once gave a course at ASPA called "Sole Proprietorship and Partnership Compensation and Deduction Issues," Eastern Regional Seminar (1995). I learned about the reduction to the $41,000 limit from David Baker in the BNA treatise he wrote many years ago. And that's all I ever needed to know! My original (an inadequate) understanding of integration came while I was a Tax Law Specialist/Attorney with the EP/EO Division of the IRS (1974-1980).

Moe, with that in mind; most of what I know (see above; read: "learned since birth") is contained in the SIMPLE, SEP, and SARSEP Answer Book. [10th edition available shortly.]

Spreadsheet-type software (with optimization and solve-for functions) is the only solution.

Hope this helps you to understand the error of your ways.

[Tom Poje]

Thanks Gary. I'm always willing to defer to someone who probably knows more about this stuff than I do.

The only articles I know of are:

Earned Income Calculations by Cynthia Groszkiewicz which appeared in The Pension Actuary February 1993. I only have a few pages of that article stuffed in a folder. But a search of the internet for Cynthia shows she is still very active in the pension end of things. one could contact her.

Qualified Plan Contributions for the Self-Employed - The Mathematics of Parity by Paul G Griesemer, and Karen A. Winn

the copy of the article I have goes back to 1991(though I don't know where I got it from) . A search of the internet under Pauls name lists the the same article as appearing in The Compensation Planning Journal March 4, 1994. As far as I can tell it was (or still is) a BNA publication.

Note: in regards to the second article, the copy I have uses 1991 limits, etc. since it was indicated the article appeared in 1994 it might have been updated.

Using Publication 560 and the example from 1991 to calc FICA

Line 4 100,000 * .9235 = 92350

Line 5 92350* 2.9% = 2678 + [12.4%*53400] = 9300

The current publication says add 10788 which is simply 12.4% * 8700, so if one uses similar logic you would use 12.4% * TWB

in the article by Paul and Karen FICA on 100,000 was calculated as follows:

57,823 * 92.35% * 15.3% plus 42,177 * 98.55% * 2.9%

integration level was 53,400. The author explains how this is grossed up to 57,823.

so, using this method FICA tax = 9375, a difference of $75.

Either the article has an error in its ‘grossing up of the integration level’, or FICA was calculated slightly different back then!!!! Since I have no publication 560 going back that far I can’t check that.

But you could try contacting either of the authors if you really want an article written on the subject.

[AndyH]

FWIW, I think Moe Howard2's comments are way out of line and do not belong here.

[Bird]

Not to beat this to death, but I have one question and I'm not afraid to look foolish by asking it...

Gary-

Also note that the $41,000 limit is reduced if integrated.

I know about that rule for SEPs. I don't think it applies to qualified plans, does it?

(Thanks to Gary Lesser and Bob Garrels for joining in. They are pretty well known as experts in this area. )

[Blinky the 3-eyed Fish]

Blinky, usually you are right on the mark ... but this time you are full of crap.

I realize that Blinky may be the Boss Hog in these boards, but I would suggest that he, and others like him, follow in the steps of of Tom & WDIC who seem to have something of substance to say in their replys. Endless replys which lack substance lead to lack of credibility. No one benefits.

I guess my stature went down from right on the mark to spewing endless drivel because I objected to being called full of crap. (I apologize in advance as I realize this is one of those meaningless messages.)

[Gary Lesser]

Bird, you are correct. No it does not (the reduction to the $41K limit under IRC 402(h)(2)(B) only applies to HCE participants in integrated SEP).

[Lynn Campbell]

I second AndyH's comments, I would hope that we could exchange information, or comments, without any insults or rude retorts, especially when everyone who responds is simply trying to HELP the questioner! Maybe we have all had too much of the 2004 Election Season and it is rubbing off on us?