Integrated w/SS Part II

2 people whose comp is in excess of 80% of  the TWB +$1.00.  One is the owner who wants his contributions to max out.  That means he gets an $18,600 profit sharing.  His remaining contribution is $9,221.33, which added to 5.40% of his  excess = $18,600.  That means 3.29% goes to staff ($9.221.33/$280,000) -- does that percentage also go to Person #2 who has excess comp?   See example below.  Thanks!!

With an integrated allocation, the excess percentage can't exceed the lesser of the base percentage or the maximum percentage. 1.401(l)-2(b)(2).  You will need to do slightly under 4.1% + 4.1% of the excess to get the owner to $18,600.

I agree with Kevin C.

You need to remember that permitted disparity is the lesser of two times or the base + 5.40% in your case.  You need to do some basic algebra.  You also need to make sure that your understanding of what is in the plan document is accurate.

Let x be the allocation rate.  x times $106321 + 2x times $173679 = $18600.  Solve for x.  x = $18600 / ($106321 + 2 times $173679) = 4.09981506748163%. 

If x > 5.40%, the maximum excess percentage, then you need to change the first equation to x times $106321 + (x + 5.40%) times $173679 = $18600 and solve for x a second time.

To give you something to check against, your second employee should be allocated $12,040.28.  That assumes that I didn't err.

Got it-- thank you Kevin and MWeddell!

If you'd like to use an integration level that's less than 80% plus $1 in order to optimize the contributions down to the last dollar, you could use 70% of the Social Security Wage Base (meaning $96,930), which would lower the percentages from 4.1/4.1 down to 4.01/4.01, meaning the total allocations to all employees other than the most highly-paid employee would be about $500 less. No biggie, but fun to know.

I came up with these figures by using the little program I wrote a while back (initially using Turbo Pascal purchased from the clearance bin at Office Depot, circa 1992!) -- https://benefitslink.com/m/integ.cgi

It solves for the optimal contribution for one or more designated participants, by running through the various possible integration levels, taking into account the way the maximum percentage disparity changes at the various breakpoints. I entered a contribution of $45,377 by trial and error in order to result in an allocation of $18,600 for the top-paid participant.

What did others come up with as a total contribution? (Click on image to enlarge.)

2 hours ago, Dave Baker said:

If you'd like to use an integration level that's less than 80% plus $1 in order to optimize the contributions down to the last dollar, you could use 70% of the Social Security Wage Base (meaning $96,930), which would lower the percentages from 4.1/4.1 down to 4.01/4.01, meaning the total allocations to all employees other than the most highly-paid employee would be about $500 less. No biggie, but fun to know.

I came up with these figures by using the little program I wrote a while back (initially using Turbo Pascal purchased from the clearance bin at Office Depot, circa 1992!) -- https://benefitslink.com/m/integ.cgi

It solves for the optimal contribution for one or more designated participants, by running through the various possible integration levels, taking into account the way the maximum percentage disparity changes at the various breakpoints. I entered a contribution of $45,377 by trial and error in order to result in an allocation of $18,600 for the top-paid participant.

What did others come up with as a total contribution? (Click on image to enlarge.)

 

 

Thank you Dave!