Profit Share Contribution

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?

Yes.

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

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.

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.

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. 

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

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