| FAQ 144: Allocations--New comparability group 1 short from requested 415 limit |
I'm having trouble getting ASC to allocate the $41,000 maximum to the two owners of a corporate client in a new comparability profit sharing plan.
Under "Show Parameters" on the source screen, it is set up to allocate to 4 user-defined groups with group 1 to receive $41,000 as a dollar amount and with varying percentages to groups 2-4 (all 5% or more). (The non-owner participants are all getting the correct allocation percentages.) The two owners both had comp of $202,000.20. ASC is allocating $40,309.56 to them as a contribution, although it is showing $41,000 as the basis in the right-and column of the Contributions screen. The 415 limits are correctly defined as 100% or $41,000 and compensation limit is correctly defined as $205,000. I also tried running the allocation by limiting the owners by the 415 limit on the group allocation screen, but I got the same results.
I know I could just manually change their contributions to $41,000 and move on, but ASC should be able to do this allocation correctly. In fact, I did a very similar allocation recently with no problem. The only difference being that there was only one owner and her income was over $205,000. Is there something I'm coding wrong?
The difference in the 2 cases is that in this plan you must have the following scenario: a top-heavy plan, an allocation condition on the PS of 1000 hours, and some active employees with less than 1000 hours. These employees must receive the top-heavy minimum - but are not eligible to receive the standard PS. The symptom that you see is the system reducing the Key ees allocations to cover the top heavy minimum for those not eligible for the standard PS. Although the Budget automatically adjusts for this because it is doing design work, the normal Calculations/Valuation does not. To work around this, you can either run the Budget -- or you can code an overall "Discretionary Amount" in the Source 2 specs under the "Show Total Contrb." box for the valuation calcs. This Discretionary Amount should be the amount currently allocated, plus the amount the keys are short (e.g. 103k allocated, Keys short 690.44 -- input 103609.44).