Relationship of contribution limits between SEP-IRA and SARSEP

[Guest smrosenberry]

My single-employee C-corp has established SEP-IRA and SARSEP plans. My understanding is the maximum corporate (employer) contribution to the SEP-IRA is 25% of compensation up to a maximum $49000, and the maximum deferred salary (employee) contribution to the SARSEP is $16500 plus an additional $5500 makeup contribution since I turned 50 this year. I have two questions (but reserve the right to followups ):

1) Are the limits between the two plans additive or in total?

For example, if the employee compensation is $100,000, can the corporation contribute $25,000 under the SEP-IRA plan (25% of $100,000) and the employee defer $22000 ($16500 maximum contribution + $5500 makeup contribution) under the SARSEP for a total contribution to the employee's retirement account of $47,000?

Or is the maximum contribution to the employee's retirement account by both corporation and employee in total $25000 under both plans (a maximum 25% total of $100,000)?

2) Does the makeup contribution under the SARSEP plan count as deferred salary or simply an employee contribution to the retirement account?

Thank you for the assistance,

Steve

[Bill Presson]

SARSEP's had to be established before 1997.

Does that change your questions?

[Guest smrosenberry]

SARSEP's had to be established before 1997.

Does that change your questions?

Nope, I'm good there. This is the first year in a long time that contribution limits were a factor. The intricacies of that section of the spreadsheet have gone fuzzy with dust and cobwebs...

[Gary Lesser]

1. With a 25% contribution there would be no room for normal elective contributions -- $25,000 + $5,500 = $30,500

2. With $16,500 normal elective + 4.3750060% employer contribution ($4,375) = 25% + catch-up = $16,500 + $4,375 + 5,500 = $26,375. Note that normal elective contributions reduce the amount the 25% limit is applied to.

Hope this helps.

[Guest smrosenberry]

1. With a 25% contribution there would be no room for normal elective contributions -- $25,000 + $5,500 = $30,500

2. With $16,500 normal elective + 4.3750060% employer contribution ($4,375) = 25% + catch-up = $16,500 + $4,375 + 5,500 = $26,375. Note that normal elective contributions reduce the amount the 25% limit is applied to.

Hope this helps.

Thanks, Gary. I'm not sure it "helps", but at least now I understand the rules...