Re: 401K for self employed question

From: DPSnyder <DPSnyder@aol.com>
Subject: Re: 401K for self employed question
Date: Wed, 20 May 1998 13:06:33 -0400 (EDT)

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> read that the new tax law increases the degree to which partnerships and
> sole proprietoryships may match contributions on a 401K plan.  I read the
> match can be even more than dollar for dollar, providing discrimination
> tests are passed.

The new tax law now allows sole props' & partners' match money to be tested
separately from their deferral money in the nondiscrimination testing.
Previously, all of the contribution was treated as deferrals.  This will allow
them to save more before the nondiscrim test limits kick in.

> So, suppose a sole proprietorship shows a profit of say, $5,000 on a
> schedule C? What's the maximum that could be placed in a 401K?

The maximum that can go into a 401(k) plan is 15%.  You might want to look at
a SIMPLE IRA.  There is no 15% limit on the SIMPLE IRA.



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