Integration calculation and check on a self employed individual

[Magill]

If you have a straight 6% profit sharing plan with 5.7% on wages above social security wage base what is the formula.  I do not know if my formula is wrong or my procedure for checking after calculation is wrong.  Anyone run into this scenario.

[Miles Leech]

Are you saying the plan uses a permitted disparity formula and is using 100% of the taxable wage base? 

If so, you could view the formula as either

• 6% of all compensation, plus an additional 5.7% on any compensation over the SS wage base
• 6% of compensation between 0 and the SS wage base, and 11.7% on compensation over the integration level

Both achieve the same thing, and I've seen different individuals prefer calculating it either way. If you're asking specifically about a formula for excel to calculate it, I'd use

=0.06*B2 + 0.057*MAX(0,B2-176100)

Assumes 2025 taxable wage base, replace the 176,100 if using a different year. B2 would be the compensation used for allocations, can be changed to meet your needs.

[CuseFan]

I think Magill's issue stems from the circular nature of compensation and contribution calculations for self-employed individuals when net earned income is just above or less than the 401(a)(17) limit.

[Bri]

So if he's got the derived Earned Income number popping in somewhere else, that becomes the B2 in Miles's formula above.