New Safe Harbor Plan Effective 10-1-2010

[steverenner]

Setting up a Profit Sharing Plan that will also be a Safe Harbor 401(K)- 3% SHNE. The business is an S-Corp. Owner did not start taking any compensation from the company until July. My thought was to make the Profit Sharing plan retroactive to 7-1-2010, and then add the 401K and safe harbor provision 10-1-2010. The thought process is to capitalize on the owners comp only being from 7-1 forward, and thus limiting the Profit Sharing that has to be put in for the NHCEs. But then I stopped because I now have the following questions...

1) Will the compensation limit be pro-rated to $122,500?

2) Will the 415 limit be pro-rated to 24,500?

If question #2 is yes, then we would make the PSP retroactive to 1-1-2010.

It would not be the end of the world if we make the plan effective date retroactive to 1-1-2010, but just trying to shave some $$ off the employer contribution. Using the Corbel prototype document.

[Lou S.]

Short plan year = prorated comp and 415 limit.