401(k)employer deduction

[Guest TCAT]

1) the employer ded limit for a psp is 15% of comp. On a 401(k) is the comp number before or after deferral. Ex: $100,000 payroll, $5,000 deferral. Is it 15% of $100K or $95K?

2) What is the actual employer deduction on tax return. The employer match, the employee deferral or both. Ex: EE deferral $5,000, ER match $2,500. Is the line item $5k or $7.5k limited by 15 percent of question 1?

Basic, but confusing!

Thanks

[MWeddell]

The definition of compensation for 404 deductibility purposes is after one subtracts out the elective deferrals. This didn't change when Congress changed the 415 definition of compensation.

Elective deferrals are considered a type of employer contribution and are included in what is deductible. In your example, $7500 should be <= 15% of net compensation.