- Section 45E of the tax code requires that at plan have has at least one employee eligible to participate who is not a highly compensated employee: https://www.law.cornell.edu/uscode/text/26/45E
- The maximum base rate is 25%. From that the maximum profit sharing contribution for the self-employed individual is 25% / (1 + 25%) = 20%. The profit sharing contribution for all participants must be based on the same base rate, so if compensation is under the $290,000 limit, if 20% net earnings is contributed for the owner, 25% of W-2 wages must be contributed for the W-2 employee.
- 25%
- 20%
‎April 17, 2022
4:56 PM
