If you can swing it, I’d just do $3k per pay period this year and then spread it out evenly next year. I like the mental part of not knowing what your paystub would look like without the withholding.
Is there a particular reason why you have a 3.5% match on the first 6% of compensation? This is not a safe harbor employer match.
Without a safe harbor plan, unless all employees are HCEs, it is virtually guaranteed that the plan will fail ADP testing and a portion of your $18K will be an excess contribution and it and earnings will be returned.
If you can swing it, I’d just do $3k per pay period this year and then spread it out evenly next year. I like the mental part of not knowing what your paystub would look like without the withholding.
Is there a particular reason why you have a 3.5% match on the first 6% of compensation? This is not a safe harbor employer match.
Without a safe harbor plan, unless all employees are HCEs, it is virtually guaranteed that the plan will fail ADP testing and a portion of your $18K will be an excess contribution and it and earnings will be returned.
It is a QACA safe harbor plan. 100% match on the first 1% deferral and 50% match on the next 5% deferral.
If you can swing it, I’d just do $3k per pay period this year and then spread it out evenly next year. I like the mental part of not knowing what your paystub would look like without the withholding.
For example the max compensation in consideration can be $270,000 and 6% of it is $16,200. So I have to defer more than 6% to reach $18,000 limit. If I compensate myself $45,000 per pay period to make that $270,000 and deferring $3K to reach the $18K deferral, I might be able to maximize the employer match and pay required taxes on the $42K. If I already paid enough federal/state estimated taxes for 2017, can I say zero federal withholding for the rest of the year and just pay FICA taxes?
Thanks.
HI
I was only discussing the employee contribution. Agree with the others that profit sharing seems like a reasonable setup to get from ($18k + match) to $54k.
Ok, that makes sense now, QACA safe harbor 401k plans are not that common.
Did your TPA mention a New Comparability Method profit sharing option? Depending on the census of your employees, you might be able to max out the $54K annual addition limit.
Instead of an employer match, you make non-elective employer contributions. A minimum of 3% is required in a safe harbor 401k plan. This allows a larger contribution percentage for a class of Employees (you) than other class(s) of employees (everyone else).
This would allow you to make a $36K employer contribution in addition to the $18K deferral. The plan must be cross-tested and the other employee’s contributions may be > 3%, but it will allow a much larger employer contribution for you.
Ok, that makes sense now, QACA safe harbor 401k plans are not that common.
Did your TPA mention a New Comparability Method profit sharing option? Depending on the census of your employees, you might be able to max out the $54K annual addition limit.
Instead of an employer match, you make non-elective employer contributions. A minimum of 3% is required in a safe harbor 401k plan. This allows a larger contribution percentage for a class of Employees (you) than other class(s) of employees (everyone else).
This would allow you to make a $36K employer contribution in addition to the $18K deferral. The plan must be cross-tested and the other employee’s contributions may be > 3%, but it will allow a much larger employer contribution for you.
Yes what I have is a QACA plan with Profit Sharing. I intend to use the profit sharing component to reach the 54K portion. However if I max the 18K deferral + 3.5% match then the profit sharing would be less.
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