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Posted

Plan has a pro rata formula.   3 participants, 2 owners and one NHCE.    25% of plan compensation is 149,126.93.    Company would like to make a 129,000 contribution.   

 

The 2 owners make around 266,000 each and their P/S contribution is capped at 57,000.00    Their deferrals are less than 6,500 so all are reclassified as catch up.    Their contribution percentage comes to 21.39% and 21.41%.    Can the remaining 15,000 be allocated to the participant, her contribution percentage would be 25.71%.    I can't get the software to allocate it like this, not sure If i'm not remembering something that would prevent the company from contributing that much.   The max the software will allocate is 25% to the NHCE.    

Posted

You can do it.  You might want to ask the software provider why it won't allocate all; there might be a setting although I can't see why it would ever cap an individual like that.

Ed Snyder

Posted

The plan document should specify what happens when a contribution cannot be allocated due to 415 limits. It will probably say that the remaining contribution is allocated to other eligible participants.

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

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