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Sole Proprietor's Deferrals Plus Catch-Up -- What If Limit Is Exceeded?
BenefitsLink Message Boards Link to more items from this source
Apr. 6, 2021

"Say you have a sole prop with one employee. Sole prop's Schedule C is low enough so that taking into account the contribution for the employee, and the earned income reduction, the sole prop's net 'plan' income is, say, $25,500. Sole prop is catch-up eligible, and deferred $26,000. Now, under IRC 414(v)(2)(A)(ii) the sole prop deferral can't exceed $25,500. So I assume the excess $500 is considered a 415 violation? I don't see what else it could be -- not a 402(g) violation nor an ADP failure."

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