FAQ 663: Budget--Integrated PS allocation w/sole prop - 404 limit calculation


This is an integrated profit sharing plan with salary deferrals and a basic safe harbor match. It is also a sole proprietorship. When I run calculations to target the owner at her 415 limit, I get an error message stating that the allocation is in excess of the 404 limit. How can I run the budget to calculate the 404 maximum?


You must use a "guess and check" methodology to arrive at the "Source 2 Contribution" to enter in the Budget setup screen that will get the owner just to the 404 limit. Start with the amount that would be the 404 limit based on the most recent compensation in the plan, then see how close you are to the 404 limit. Then adjust and interpolate from there and you should hit it within 3 or 4 runs. Remember that if you have additional contributions besides source 2, you will need to include those in your 404 calcs, even though the budget setup screen requires the input of the source 2 contribution only.