More Qualified Plan Rules and Options Flashcards
Deduction limits DC and DB
Maximum deduction 25% of all eligible compensation
Defined Contribution Limits 415
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
Defined Benefit Contribution Limits
$210000
100% comp
Annual Compensation Limit
$265000
Max Deferral
$18000
catch up $6000
Max Profit Sharing Contribution
25%
Compensation
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
Multiple Employers
Still $18000 limit combined
Employers together can contribute more than $53000 if unrelated
Self Employed
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%
Top Heavy Plans
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
Loans
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
Simple Limits
12500
catch up 3000