401(k) Small Employer - 4 F/T employees

[Guest]

start by looking at a non 401(k).

15% of compensation is only 56,700. That is the maximum contribution for the plan. (If you add deferral option, that figure will go down.)

If the intention is to get the owners 30,000 contrib, you would have to have a money purchase plan as well. Since the plan(s) would probably be top heavy, you could put in a 3% (or more) money purchase to cover that end of things. This would free up enough room under the 15% ps limit to possibly get the doctors a combined plan total of 30,000.

If you add a deferral feature, you better hope your 2 rank and file ees defer something worthwhile, otherwise you will fail the ADP test.

If the owners don't care about getting the 30,000, then small plans might best be run as a safe harbor or simple 401(k). You are guarenteed passing the ADP test.

[Guest Colonel]

Formulas for designing a 401(k)/Profit Share Plan for small employer, 2 principals each making $160K and two other employees with salaries of $28K & $30K respectively. Which plan design will allow for greatest contribution for principals and least contribution by employer for other employees. And based on those salaries, what would be the maximum annual contributions to each principal's account.

[Dowist]

You might also want to think about a defined benefit plan, especially if the owners are old and the other employees are not. With a db plan you could possibly get more than 30000 for each of the owners into the plan each year. But db plans are more expensive and they are a BIG commitment.

[LCARUSI]

DB plans are not necessarily more expensive - it depends on the level of benefits. And yo have the flexibility to fund it on an actuarial basis.

[MWeddell]

For a group with four employees, administrative costs of d.c. plan administration are typically much less than a d.b. plan. With a d.c. approach, you're probably looking at a combined money purchase pension plan and profit sharing plan approach to give the employer some flexibility but still allow $30,000 of annual additions to the principals without violating 404 limits. Tom Poje's posting is correct. Whether a cross-testing approach or just an integrated formula makes sense depends on the employees' birth dates.

[This message has been edited by MWeddell (edited 09-01-1999).]