Profit Share Contribution

[coleboy]

Plan as a pro-rata formula for profit share. CPA tells client to put in $100,000 for profit share. However, HCE maxes out at the $54,000 limit so only $60,000 of the amount is allocated.

Client is not happy. Boss tells me to "make it happen." Can the remaining $40,000 then be allocated to the non-HCE's?

[BG5150]

Yes.

[coleboy]

Do I just allocate the remainder to the non-HCE's on a pro-rata basis as well?

[401king]

1 hour ago, coleboy said:

Plan as a pro-rata formula for profit share.

 

28 minutes ago, coleboy said:

Do I just allocate the remainder to the non-HCE's on a pro-rata basis as well?

Yes.

[jpod]

Everyone must get the same percentage of compensation (as defined in the Plan and subject to the $270K limit), except those who are at the 415 limit.

[ESOP Guy]

In fact in some of my richer ESOPs we have to do several iterations of the allocation because of what you describe. That is to say on the first pro-rata there are a people over the 415 limit.  So I reduce them to the 415 limit and allocate on a pro-rata basis the remaining amount.  This puts a couple more people over the 415 limit.  So I reduce them to the 415 limit and allocate the remaining pro-rata.  I think the most I have ever done is 5 iterations.  Most common seems to be 3 iterations. 

[jpod]

Assuming the allegation is true, what he should make happen is to get a new cpa.  Completely irresponsible.    

[coleboy]

Thank you everyone! As usual you've been a big help. I don;t see too many clients putting in a profit share anymore.