Partner calculation of pension compensation

[rfahey]

I am trying to confirm the computation of "net pension income " for partners ( K-1).

Before any pension cost deductions you begin with their K-1.

Then you subtract the partner's share of any employee contributions ( 3% safe harbor and any profit sharing allocation )

The you subtract the partners own 3% safe harbor contribution plus his share of the profit sharing allocation.

Finally you subtract his self employment tax deduction.

THis gives you his "net pension income " to calculate the 3% safe harbor as well as his share of the profit sharing allocation.

You do not subtract his 401K plan salary deferrals in this calculation.

Is this correct ?

THank you.

[EBDI]

I agree with your method except that I don't subtract the partners own safe harbor and profit share allocation. After I subtract the partners share of the Common Law employees employer contribution, I calculate the self employment tax and the result is the net pension income. You are correct that you don't subtract the partners 401k deferrals.

[K2retire]

You only deduct half of the self employment tax.