2009 and 2010 Safe Harbor Cross Tested Basic Mathematics

For a business owner over age 50, one of the best designs for a 401(k) Plan where there are a number of younger employees (as compared to the age of the owner), would be a Safe Harbor Cross Tested 401(k).

Consider making a 4.42% of pay contribution for the non-owners consisting of a 3% Safe Harbor and a 1.42% additional Profit Sharing.

This will allow the business owner to do $22,000 in Salary Deferrals plus $32,500 in Profit Sharing for the $54,500 limit.  This assumes the business owner is making over $245,000 in salary or income after all contributions and that the allocations pass certain discrimination testing based on projected benefits.

See this very small case study

http://www.401kacademy.com/401kpdf/shctsmallhighearnings.pdf

Should the owner be able to afford more than the $54,500 for themself and the 4.42% contribution for the support staff, consider using a 401(k) Cash Balance Combo Plan where an owner in their 50's might be able to put away an additional $100,000 to $180,000 depending upon their age.

Submit census information consisting of name, date of birth, date of hire, ownership and annual compensation estimate to paul.carlson@plandesign.com for an illustration of what can be done.