Total contributions to a participant’s account, not counting catch-up contributions for those age 50 and over, cannot exceed ,000 (for 2017; ,0) Example: Ben, age 51, earned ,000 in W-2 wages from his S Corporation in 2016.
He deferred ,000 in regular elective deferrals plus ,000 in catch-up contributions to the 401(k) plan.
A business owner with no common-law employees doesn't need to perform nondiscrimination testing for the plan, since there are no employees who could have received disparate benefits.
The no-testing advantage vanishes if the employer hires employees.
His business contributed 25% of his compensation to the plan, $12,500.
Total contributions to the plan for 2016 were $36,500.
When figuring the contribution, compensation is your “earned income,” which is defined as net earnings from self-employment after deducting both: Use the rate table or worksheets in Chapter 5 of IRS Publication 560, “Retirement Plans for Small Business,” for figuring your allowable contribution rate and tax deduction for your 401(k) plan contributions.