Question #16 test 1203/98

[Guest Jhagan]

What is the employer's maximun deductible discretionary profit sharing plan contribution?

- Total eligible compensation $1,000,000

- 401(k) deferrals - $50,000

- Matching contributions - $25,000

Answer $67,500 ?????

[Guest DSD]

Compensation for deductibility purposes is defined as total eligible comp less salary deferrals. Therefore:

1,000,000 - 50,000 = 950,000

950,000 x 15% = 142,500 maximum deduction for employer

Max PS that can be made is 142,500 - 50,000 - 25,000 = 67,500