Compensation for Mid year Safe-Harbor Plan of Sole Proprietor

[JButtrick]

A Sole Proprietor with employees and an existing PS plan (NOT 401(k)) wants to add a Safe-Habor K feature before October 2005. I believe that is permissable as long as there was not previously a K feature.

For the employees, the SH contribution must be based on pay from (at least) the effective date of the feature to the end of the year and their K contributions will necessarily be limited to 100% of pay after the feature is added.

But, what about the owner? Since his income isn't determined until year end, can he count the whole year's income? Does he need to pro-rate his income? Pro-rating would seem most equitable, but is it required? I assume that his draw doesn't figure into the calculation.

[JButtrick]

39 folks have looked at this post, but none have responded.

Is this a question for which there is no answer or is it too obvious to deserve a response?

[mbozek]

Isnt the issue whether including all of his pay would be discriminatory comp under 414(s)? Check the regs to see whether plan comp can be designed this way or just pro rate his comp.