maximum combined contribution

Submitted by mike silvers on Thu, 2018-04-12 16:20

My S corp will contribute 53,000 for me to a 2017 defined contribution plan based on my w2 earnings; this year I also have substantial self employed earnings of 395,000 reported on schedule C

Does that mean I can also put another 53,000 away into a sep. Turbo tax seems to let me but I thought there was some maximum amount limit.

thanks



Submitted by William Tuttle on Fri, 2018-04-13 00:40

If you own >= 80% in both businesses this would be a control group. A single annual addition limit would apply to both businesses. The are other possible complex rules even if your are not a control group. What is your ownwership interest in both companies?

Submitted by mike silvers on Fri, 2018-04-13 12:35

100% in both businesses Does that mean I am limited to only one 54,000 contribution.?

Submitted by William Tuttle on Fri, 2018-04-13 15:11

  • Yes, all businesses 100% owned are part of a controlled group subject to one annual addition limit.
  • With this amount of compensation, you should definitely investigate a combined DC/DB plan for next year. The adoption deadline for 2017 contributions was 12/31/17.
  • Assuming you have no eligible employees other than optionally a spouse. You can have a one-participant 401k and a cash balance plan.
  • You can make an employee elective contribution up to the limit 2018 = $18.5 Usually you can also make a 6% employer contribution on up to the compensation limit 2018 = $275K = $16.5K. 401k total = $35k.
  • You can then make an actuarial based contribution to cash balance plan.
  • With this level of compensation, depending on age (> 40), the total could easily run into six figures.
  • Contact a Third Party Administrator well before 12/31/18 to determine if this is a good option for you.

Submitted by mike silvers on Fri, 2018-04-13 22:07

thank you very much

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