More Qualified Plan Rules and Options

Question 1

Deduction limits DC and DB

Answer 1

Maximum deduction 25% of all eligible compensation

Question 2

Defined Contribution Limits 415

Answer 2

415 annual addition limits - $53000 or 100% of comp
employer contributions
employee contributions
forfeitures

If employee received excess of 415 limit

• reallocate to employees who have not reached limit
• apply to later year
• use to reduce plan contributions

Question 3

Defined Benefit Contribution Limits

Answer 3

$210000

100% comp

Question 4

Annual Compensation Limit

Answer 4

$265000

Question 5

Max Deferral

Answer 5

$18000

catch up $6000

Question 6

Max Profit Sharing Contribution

Answer 6

25%

Question 7

Compensation

Answer 7

taxable compensation paid or accrued in the current
year

contributions are based on pre deferral salary

Overtime, bonuses and one time or non-reoccurring bonuses can but don’t have to be included

Question 8

Multiple Employers

Answer 8

Still $18000 limit combined

Employers together can contribute more than $53000 if unrelated

Question 9

Self Employed

Answer 9

Keogh
-profit sharing
-money purchase
Target Benefit Plans

Based on net earnings - owner /employee net earnings after all deductions including deductions for employee only plan contributions (net schedule C)

1/2 self-employment tax must be deducted before deductible contribution can be determined

Annual Additions limit applies $53000 or 100% of comp

NO S corps

Self employed shortcut method

Net Schedule C income
X 12.12% for 15%
X 18.59% for 20%

Question 10

Top Heavy Plans

Answer 10

more than 60% of the total amount in the accounts of all employees is allotted to key employees.

Key=
more 5% owner
officer and comp over 170k
>1% owner and comp >150k

If top heavy must use a faster vesting schedule

DB-2% compensation X number of employees years service in which the plan is top heavy max 10

DC- no less than 3% of each non key employees compensation

DOES NOT apply to profit sharing plans

Question 11

Loans

Answer 11

IRC 72p

Loans are tax free provided that:

• required to be repaid
• lesser of 50% or $50000
• small accounts up to $10000 without limitation
• term cant exceed 5 years unless principal residence
• exception to 5 years is LOA less than 1 year
• payments at least quarterly
• failed payment is deemed a taxable distribution(taxes and penalty if under 591/2

-interest on loan consumer and not deductible unless for primary residence
secured by primary residence
(unless key employee-never deductible!)

• No loans from SEP Simple SAR SEP
• seldom from DB, ESOP, or target benefit though allowed

Question 12

Simple Limits

Answer 12

12500

catch up 3000