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Tax Deductible Limits for 401(k) Plans

What are the tax-deductible limits for 401(k) plans?

Recent tax legislation allows employers to deduct up to 25% of eligible compensation as an employer contribution to their 401k profit sharing plan. The total employer contribution includes both matching and profit sharing amounts.

Many of our client's have the means and desire to contribute and deduct larger amounts than the 25% of compensation limitation. This can be accomplished using a dual plan strategy where a defined benefit plan is established to operate in concert with a 401k profit sharing plan.  This dual plan design creates a synergy for increased pension benefits and the resulting deductibility of the contribution.

If this is of interest to you please read the article in our 'white papers' section written by one of our actuarial providers, 'Cash Balance Add-On.'  As this is a more complex design strategy we encourage you to involve your CPA firm in the decision making process.

This information is of a general nature and is subject to change. It is provided to give you a broad overview of these matters and should not be construed as legal advice. It is not our position to offer legal or tax advice. You should consult with a tax advisor about your particular situation.

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Information is provided for review and consideration only. Please consult legal and tax advisors for practical advice pertaining to your business and personal situations.

This page was last reviewed and/or updated on Friday, August 13, 2010 10:46 AM

 
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