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Session 2
Retirement PlanThreats and Opportunities
Bill Karbon, EVP and Director of ComplianceCBIZ
Adam PozekPartner and Retirement Plan Consultant
DWC – The 401(k) Experts
Pension Geeks, Inc.
• Newly established firm as of January 1, 2018
• LLC taxed as an S-Corp
• Two owners
– Mary Jones: 60 percent
– Troy Smith: 40 percent
• Two other employees
• Considering implementing a retirement plan
Pension Geeks, Inc.
• Assumptions
– Tax rates do not change during participant lifetimes
– Mortality table – 2018 417(e) mortality (life annuity)
Name W2 Comp QBITaxable Income
Mary Jones $120,000 $60,000 $180,000
Troy Smith $120,000 $40,000 $160,000
Jane Doe $50,000 N/A N/A
John Thomas $40,000 N/A N/A
TOTAL $330,000 $100,000 $340,000
Projected Census(Conservative)
No Retirement Plan
Mary Troy
W2 Comp $120,000 $120,000
QBI $60,000 $40,000
Less Deferrals -$0 -$0
Less ER Contribution* -$0 -$0
Adjusted QBI $60,000 $40,000
Taxable Income $180,000 $160,000
Less QBI Deduction -$6,600 -$7,600
Net Taxable Income $173,400 $152,400
Less Income Tax -$37,177 -$30,865
Take Home Pay $142,823 $129,135
Tax Impact/QBI Deduction(Conservative)
No Plan
Filing as Single Individual
*Allocable share based on 60/40 ownership split
NameW2
CompQBI
Taxable Income
Deferral Match Total
Mary Jones $120,000 $60,000 $180,000 $15,500 $3,600 $19,100
Troy Smith $120,000 $40,000 $160,000 $12,500 $3,600 $16,100
Jane Doe $50,000 N/A N/A $1,000 $1,000 $2,000
John Thomas $40,000 N/A N/A $1,000 $1,000 $2,000
TOTAL $330,000 $100,000 $340,000 $30,000 $9,200 $39,200
Projected Census(Conservative)
SIMPLE IRA
Match = 100 percent of the first three percent deferred
Tax Impact/QBI Deduction(Conservative)
SIMPLE IRA
Match = 100 percent of the first three percent
deferred
Filing as Single Individual
*Allocable share based on 60/40 ownership split
Mary Troy
W2 Comp $120,000 $120,000
QBI $60,000 $40,000
Less Deferrals -$15,500 -$12,500
Less ER Contribution* -$5,520 -$3,680
Adjusted QBI $54,480 $36,320
Taxable Income $158,980 $143,820
Less QBI Deduction -$10,573 -$7,264
Net Taxable Income $148,407 $136,556
Less Income Tax -$29,907 -$27,063
Take Home Pay $129,073 $116,757
Mary Troy
SIMPLE IRA $19,100 $16,100
Annual Tax Deferred $7,270 $3,800
Accum to 65 at 4% $349,400 $412,900
Pre-tax annual benefit $25,200 $29,800
Post-tax annual benefit* $19,100 $22,600
After-tax savings w/o plan $13,200 $12,200
Capital gains tax (15.0%) $8,300 $13,600
Post-tax accum to 65 @ 4% $232,500 $297,000
Post-tax annual benefit $16,800 $21,400
Better/(worse) with plan $2,300 $1,200
Plan Versus No Plan(Conservative)
*Assumes $100,000 of taxable income outside of plan
SIMPLE IRA
Match = 100 percent of the first three percent
deferred
Filing as Single Individual
Mary T3oy
SIMPLE IRA $19,100 $16,100
Annual Tax Deferred $7,270 $3,800
Accum to 65 at 6% $401,400 $497,600
Pre-tax annual benefit $34,600 $42,900
Post-tax annual benefit* $26,300 $32,600
After-tax savings w/o plan $13,200 $12,200
Capital gains tax (15.0%) $13,400 $22,500
Post-tax accum to 65 @ 6% $261,400 $347,500
Post-tax annual benefit $22,500 $30,000
Better/(worse) with plan $3,800 $2,600
Plan Versus No Plan(Conservative)
*Assumes $100,000 of taxable income outside of plan
SIMPLE IRA
Match = 100 percent of the first three percent
deferred
Filing as Single Individual
Tax Impact/QBI Deduction(Conservative)
SIMPLE IRA
Match = 100 percent of the first three percent
deferred
Mary - Single Individual
Troy – Married Joint
*Allocable share based on 60/40 ownership split
Mary Troy
W2 Comp $120,000 $120,000
QBI $60,000 $40,000
Less Deferrals -$15,500 -$12,500
Less ER Contribution* -$5,520 -$3,680
Adjusted QBI $54,480 $36,320
Taxable Income $158,980 $143,820
Less QBI Deduction -$10,573 -$7,264
Net Taxable Income $148,407 $136,556
Less Income Tax -$29,907 -$21,921
Take Home Pay $129,073 $121,899
Mary Troy
SIMPLE IRA $19,100 $16,100
Annual Tax Deferred $7,270 $3,800
Accum to 65 at 4% $349,400 $412,900
Pre-tax annual benefit $25,200 $29,800
Post-tax annual benefit* $19,100 $22,600
After-tax savings w/o plan $13,200 $12,600
Capital gains tax (15.0%) $13,400 $13,900
Post-tax accum to 65 @ 4% $261,400 $304,900
Post-tax annual benefit $22,500 $22,000
Better/(worse) with plan $3,800 $600
Plan Versus No Plan(Conservative)
*Assumes $100,000 of taxable income outside of plan
SIMPLE IRA
Match = 100 percent of the first three percent
deferred
Mary - Single Individual
Troy – Married Joint
Mary Troy
SIMPLE IRA $19,100 $16,100
Annual Tax Deferred $7,270 $3,800
Accum. to NRA at 6% $401,400 $497,600
Pre-tax annual benefit $34,600 $42,900
Post-tax annual benefit* $26,300 $32,600
After-tax savings w/o plan $13,200 $12,600
Capital gains tax (15.0%) $13,400 $15,400
Post-tax accum to 65 @ 6% $261,400 $356,600
Post-tax annual benefit $22,500 $30,800
Better/(worse) with plan $3,800 $1,800
Plan Versus No Plan(Conservative)
*Assumes $100,000 of taxable income outside of plan
SIMPLE IRA
Match = 100 percent of the first three percent
deferred
Mary - Single Individual
Troy – Married Joint
NameW2
CompQBI
Taxable Income
DeferralProfit
SharingTotal
Mary Jones $120,000 $60,000 $180,000 $24,500 $6,000 $30,500
Troy Smith $120,000 $40,000 $160,000 $18,500 $6,000 $24,500
Jane Doe $50,000 N/A N/A $1,000 $2,500 $3,500
John Thomas $40,000 N/A N/A $1,000 $2,000 $3,000
TOTAL $330,000 $100,000 $340,000 $45,000 $16,500 $61,500
Projected Census(Conservative)Traditional 401(k) Plan
Profit Sharing = Five Percent Pro Rata
Tax Impact/QBI Deduction(Conservative)
Traditional 401(k) Plan
Profit Sharing =
Five Percent Pro Rata
Filing as Single Individual
*Allocable share based on 60/40 ownership split
Mary Troy
W2 Comp $120,000 $120,000
QBI $60,000 $40,000
Less Deferrals -$24,500 -$18,500
Less ER Contribution* -$9,900 -$6,600
Adjusted QBI $50,100 $33,400
Taxable Income $145,600 $134,900
Less QBI Deduction -$10,200 -$6,680
Net Taxable Income $135,580 $128,220
Less Income Tax -$26,829 -$25,062
Take Home Pay $118,771 $109,838
Plan Versus No Plan(Conservative)
Traditional 401(k) Plan
Profit Sharing =
Five Percent Pro Rata
Filing as Single Individual
*Assumes $100,000 of taxable income outside of plan
Mary Troy
401(k) + PSP $30,500 $24,500
Annual Tax Deferred $10,300 $5,800
Accum to 65 at 4% $557,900 $628,300
Pre-tax annual benefit $40,200 $45,300
Post-tax annual benefit* $30,500 $34,400
After-tax savings w/o plan $21,900 $18,600
Capital gains tax (15.0%) $13,800 $20,600
Post-tax accum to 65 @ 4% $384,600 $452,100
Post-tax annual benefit $27,700 $32,600
Better/(worse) with plan $2,800 $1,800
Plan Versus No Plan(Conservative)
Traditional 401(k) Plan
Profit Sharing =
Five Percent Pro Rata
Filing as Single Individual
*Assumes $100,000 of taxable income outside of plan
Mary Troy
401(k) + PSP $30,500 $24,500
Annual Tax Deferred $10,300 $5,800
Accum to 65 at 6% $641,000 $757,200
Pre-tax annual benefit $55,300 $65,300
Post-tax annual benefit* $42,000 $49,600
After-tax savings w/o plan $21,900 $18,600
Capital gains tax (15.0%) $22,200 $34,200
Post-tax accum to 65 @ 6% $432,400 $528,700
Post-tax annual benefit $37,300 $45,600
Better/(worse) with plan $4,700 $4,100
Name W2 Comp QBITaxable Income
Mary Jones $180,000 $120,000 $300,000
Troy Smith $180,000 $80,000 $260,000
Jane Doe $50,000 N/A N/A
John Thomas $40,000 N/A N/A
TOTAL $450,000 $200,000 $560,000
Projected Census(Aggressive)
No Retirement Plan
Mary Troy
W2 Comp $180,000 $180,000
QBI $120,000 $80,000
Less Deferrals -$0 -$0
Less ER Contribution* -$0 -$0
Adjusted QBI $120,000 $80,000
Taxable Income $300,000 $260,000
Less QBI Deduction $0 $0
Net Taxable Income $300,000 $260,000
Less Income Tax -$80,690 -$66,690
Take Home Pay $219,310 $193,310
Tax Impact/QBI Deduction(Aggressive)
No Plan
Filing as Single Individual
*Allocable share based on 60/40 ownership split
NameW2
CompQBI
Taxable Income
Deferral Match Total
Mary Jones $180,000 $120,000 $300,000 $15,500 $5,400 $20,900
Troy Smith $180,000 $80,000 $260,000 $12,500 $5,400 $17,900
Jane Doe $50,000 N/A N/A $1,000 $1,000 $2,000
John Thomas $40,000 N/A N/A $1,000 $1,000 $2,000
TOTAL $450,000 $200,000 $560,000 $30,000 $12,800 $42,800
Projected Census(Aggressive)
SIMPLE IRA
Match = 100 percent of the first three percent deferred
Projected Census(Aggressive)
SIMPLE IRA
Match = 100 percent of the first three percent
deferred
Filing as Single Individual
*Allocable share based on 60/40 ownership split
Mary Troy
W2 Comp $180,000 $180,000
QBI $120,000 $80,000
Less Deferrals -$15,500 -$12,500
Less ER Contribution* -$7,680 -$5,120
Adjusted QBI $112,320 $74,880
Taxable Income $276,820 $242,380
Less QBI Deduction -$0 -$0
Net Taxable Income $276,820 $242,380
Less Income Tax -$72,577 -$60,523
Take Home Pay $204,243 $181,857
Mary Troy
SIMPLE IRA $20,900 $17,900
Annual Tax Deferred $8,100 $6,200
Accum to 65 at 4% $382,300 $459,100
Pre-tax annual benefit $27,500 $33,100
Post-tax annual benefit* $20,900 $25,100
After-tax savings w/o plan $13,600 $11,600
Capital gains tax (23.8%) $13,300 $20,000
Post-tax accum to 65 @ 4% $232,900 $273,600
Post-tax annual benefit $16,800 $19,700
Better/(worse) with plan $4,100 $5,400
Projected Census(Aggressive)
SIMPLE IRA
Match = 100 percent of the first three percent
deferred
Filing as Single Individual
*Assumes $100,000 of taxable income outside of plan
Projected Census(Aggressive)
SIMPLE IRA
Match = 100 percent of the first three percent
deferred
Mary - Single Individual
Troy – Married Joint
*Allocable share based on 60/40 ownership split
Mary Troy
W2 Comp $180,000 $180,000
QBI $120,000 $80,000
Less Deferrals -$15,500 -$12,500
Less ER Contribution* -$7,680 -$5,120
Adjusted QBI $112,320 $74,880
Taxable Income $276,820 $242,380
Less QBI Deduction -$0 -$14,976
Net Taxable Income $276,820 $227,404
Less Income Tax -$72,577 -$43,156
Take Home Pay $204,243 $199,224
Mary Troy
SIMPLE IRA $20,900 $17,900
Annual Tax Deferred $8,100 $3,983
Accum to 65 at 4% $382,300 $459,100
Pre-tax annual benefit $27,500 $33,100
Post-tax annual benefit* $20,900 $25,800
After-tax savings w/o plan $13,600 $13,600
Capital gains tax (23.8%) $13,300 $23,400
Post-tax accum to 65 @ 4% $232,900 $319,900
Post-tax annual benefit $16,800 $23,000
Better/(worse) with plan $4,100 $2,800
Projected Census(Aggressive)
SIMPLE IRA
Match = 100 percent of the first three percent
deferred
Mary - Single Individual
Troy – Married Joint
*Assumes $100,000 of taxable income outside of plan
Mary Troy
SIMPLE IRA $20,900 $17,900
Annual Tax Deferred $8,100 $3,983
Accum to 65 at 6% $439,200 $553,200
Pre-tax annual benefit $37,900 $47,700
Post-tax annual benefit* $28,800 $36,300
After-tax savings w/o plan $13,600 $13,600
Capital gains tax (23.8%) $21,300 $25,600
Post-tax accum to 65 @ 6% $258,500 $367,800
Post-tax annual benefit $22,300 $31,700
Better/(worse) with plan $6,500 $4,600
Projected Census(Aggressive)
SIMPLE IRA
Match = 100 percent of the first three percent
deferred
Mary - Single Individual
Troy – Married Joint
*Assumes $100,000 of taxable income outside of plan
NameW2
CompQBI
Taxable Income
DeferralProfit
SharingTotal
Mary Jones $180,000 $120,000 $300,000 $24,500 $9,000 $33,500
Troy Smith $180,000 $80,000 $260,000 $18,500 $9,000 $27,500
Jane Doe $50,000 N/A N/A $1,000 $2,500 $3,500
John Thomas $40,000 N/A N/A $1,000 $2,000 $3,000
TOTAL $450,000 $200,000 $560,000 $45,000 $22,500 $67,500
Projected Census(Aggressive)
Traditional 401(k) Plan
Profit Sharing = Five Percent Pro Rata
Projected Census(Aggressive)
Traditional 401(k) Plan
Profit Sharing =
Five Percent Pro Rata
Filing as Single Individual
*Allocable share based on 60/40 ownership split
Mary Troy
W2 Comp $180,000 $180,000
QBI $120,000 $80,000
Less Deferrals -$24,500 -$18,500
Less ER Contribution* -$13,500 -$9,000
Adjusted QBI $106,500 $71,000
Taxable Income $262,000 $232,500
Less QBI Deduction -$0 -$0
Net Taxable Income $262,000 $232,500
Less Income Tax -$67,390 -$57,065
Take Home Pay $194,610 $175,435
Projected Census(Aggressive)
Traditional 401(k) Plan
Profit Sharing =
Five Percent Pro Rata
Filing as Single Individual
*Assumes $100,000 of taxable income outside of plan
Mary Troy
401(k) + PSP $33,500 $27,500
Annual Tax Deferred $13,300 $9,600
Accum to 65 at 4% $612,800 $705,200
Pre-tax annual benefit $44,100 $50,800
Post-tax annual benefit* $33,600 $38,600
After-tax savings w/o plan $21,800 $17,900
Capital gains tax (23.8%) $21,400 $30,800
Post-tax accum to 65 @ 4% $373,300 $420,400
Post-tax annual benefit $26,900 $30,300
Better/(worse) with plan $6,700 $8,300
Projected Census(Aggressive)
Traditional 401(k) Plan
Profit Sharing =
Five Percent Pro Rata
Mary - Single Individual
Troy – Married Joint
*Allocable share based on 60/40 ownership split
Mary Troy
W2 Comp $180,000 $180,000
QBI $120,000 $80,000
Less Deferrals -$24,500 -$18,500
Less ER Contribution* -$13,500 -$9,000
Adjusted QBI $106,500 $71,000
Taxable Income $262,000 $232,500
Less QBI Deduction -$0 $14,200
Net Taxable Income $262,000 $218,300
Less Income Tax -$67,390 -40,971
Take Home Pay $194,610 $191,529
Projected Census(Aggressive)
Traditional 401(k) Plan
Profit Sharing =
Five Percent Pro Rata
Mary - Single Individual
Troy – Married Joint
*Assumes $100,000 of taxable income outside of plan
Mary Troy
401(k) + PSP $33,500 $27,500
Annual Tax Deferred $13,300 $6,200
Accum to 65 at 4% $612,800 $705,200
Pre-tax annual benefit $44,100 $50,800
Post-tax annual benefit* $33,600 $39,600
After-tax savings w/o plan $21,800 $20,900
Capital gains tax (23.8%) $21,400 $36,000
Post-tax accum to 65 @ 4% $373,300 $491,500
Post-tax annual benefit $26,900 $35,400
Better/(worse) with plan $6,700 $4,200
NameW2
CompQBI Deferral
Safe Harbor
Profit Sharing
Total
Mary Jones $180,000 $120,000 $24,500 $5,400 $31,100 $61,000
Troy Smith $180,000 $80,000 $18,500 $5,400 $31,100 $55,000
Jane Doe $50,000 N/A $1,000 $1,500 $1,000 $3,500
John Thomas $40,000 N/A $1,000 $1,200 $800 $3,000
TOTAL $450,000 $200,000 $45,000 $13,500 $64,000 $122,500
Projected Census(Aggressive)
Safe Harbor 401(k) Plan (NEC)
+ New Comp Profit Sharing
Projected Census(Aggressive)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
Filing as Single Individual
*Allocable share based on 60/40 ownership split
Mary Troy
W2 Comp $180,000 $180,000
QBI $120,000 $80,000
Less Deferrals -$24,500 -$18,500
Less ER Contribution* -$46,500 -$31,000
Adjusted QBI $73,500 $49,000
Taxable Income $229,000 $210,500
Less QBI Deduction -$0 -$0
Net Taxable Income $229,000 $210,500
Less Income Tax -$55,840 -$49,365
Take Home Pay $173,160 $161,135
Projected Census(Aggressive)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
Filing as Single Individual
*Assumes $200,000 of taxable income outside of plan
Mary Troy
401(k) + PSP $61,000 $55,000
Annual Tax Deferred $24,800 $17,300
Accum to 65 at 4% $1,115,800 $1,410,500
Pre-tax annual benefit $80,400 $101,600
Post-tax annual benefit* $52,300 $66,100
After-tax savings w/o plan $39,700 $35,800
Capital gains tax (23.8%) $38,900 $61,600
Post-tax accum to 65 @ 4% $679,700 $840,700
Post-tax annual benefit $49,000 $60,600
Better/(worse) with plan $3,300 $5,500
Projected Census(Aggressive)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
Mary - Single Individual
Troy – Married Joint
*Allocable share based on 60/40 ownership split
Mary Troy
W2 Comp $180,000 $180,000
QBI $120,000 $80,000
Less Deferrals -$24,500 -$18,500
Less ER Contrib* -$46,500 -$31,000
Adjusted QBI $73,500 $49,000
Taxable Income $229,000 $210,500
Less QBI Deduction -$0 -$9,800
Net Taxable Income $229,000 $200,700
Less Income Tax -$55,840 -$36,747
Take Home Pay $173,160 $173,753
Projected Census(Aggressive)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
Mary - Single Individual
Troy – Married Joint
*Assumes $200,000 of taxable income outside of plan
Mary Troy
401(k) + PSP $61,000 $55,000
Annual Tax Deferred $24,800 $10,400
Accum to 65 at 4% $1,115,800 $1,410,500
Pre-tax annual benefit $80,400 $101,600
Post-tax annual benefit* $52,300 $77,200
After-tax savings w/o plan $39,700 $41,800
Capital gains tax (23.8%) $38,900 $72,000
Post-tax accum to 65 @ 4% $679,700 $983,000
Post-tax annual benefit $49,000 $70,800
Better/(worse) with plan $3,300 $6,400
Name DeferralSafe
HarborProfit
SharingCash
BalanceTotal
Mary Jones $24,500 $5,400 $31,100 $40,000 $101,000
Troy Smith $18,500 $5,400 $31,100 $40,000 $95,000
Jane Doe $1,000 $1,500 $1,000 $1,000 $4,500
John Thomas $1,000 $1,200 $800 $1,000 $4,000
TOTAL $45,000 $13,500 $64,000 $82,000 $204,500
Projected Census(Aggressive)
Safe Harbor 401(k) Plan (NEC) + New Comp
Profit Sharing + Cash Balance
Projected Census(Aggressive)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
+ Cash Balance Plan
Filing as Single Individual
*Allocable share based on 60/40 ownership split
Mary Troy
W2 Comp $180,000 $180,000
QBI $120,000 $80,000
Less Deferrals -$24,500 -$18,500
Less ER Contribution* -$95,700 -$63,800
Adjusted QBI $24,300 $16,200
Taxable Income $179,800 $177,700
Less QBI Deduction -$2,692 -$1,931
Net Taxable Income $177,108 $175,769
Less Income Tax -$38,364 -$37,936
Take Home Pay $141,436 $139,764
Projected Census(Aggressive)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
+ Cash Balance Plan
Filing as Single Individual
*Assumes $150,000 of taxable income outside of plan
Mary Troy
401(k) + PSP + CB $101,000 $95,000
Annual Tax Deferred $52,300 $28,800
Accum to 65 at 4% $1,847,500 $2,436,300
Pre-tax annual benefit $133,100 $175,500
Post-tax annual benefit* $88,000 $115,600
After-tax savings w/o plan $65,700 $62,800
Capital gains tax (23.8%) $64,500 $108,200
Post-tax accum to 65 @ 4% $1,125,900 $1,476,800
Post-tax annual benefit $81,100 $106,400
Better/(worse) with plan $6,900 $9,200
Projected Census(Aggressive)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
+ Cash Balance Plan
Mary - Single Individual
Troy – Married Joint
*Allocable share based on 60/40 ownership split
Mary Troy
W2 Comp $180,000 $180,000
QBI $120,000 $80,000
Less Deferrals -$24,500 -$18,500
Less ER Contribution* -$95,700 -$63,800
Adjusted QBI $24,300 $16,200
Taxable Income $179,800 $177,700
Less QBI Deduction -$2,692 -$1,931
Net Taxable Income $177,108 $175,769
Less Income Tax -$38,364 -$37,936
Take Home Pay $141,436 $139,764
Projected Census(Aggressive)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
+ Cash Balance Plan
Mary - Single Individual
Troy – Married Joint
*Assumes $150,000 of taxable income outside of plan
Mary Troy
401(k) + PSP + CB $101,000 $95,000
Annual Tax Deferred $52,300 $16,700
Accum to 65 at 4% $1,847,500 $2,436,300
Pre-tax annual benefit $133,100 $175,500
Post-tax annual benefit* $88,000 $132,800
After-tax savings w/o plan $65,700 $72,500
Capital gains tax (23.8%) $64,500 $124,400
Post-tax accum to 65 @ 4% $1,125,900 $1,705,500
Post-tax annual benefit $81,100 $122,900
Better/(worse) with plan $6,900 $9,900
Projected Census(Aggressive)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
+ Cash Balance Plan
Mary - Single Individual
Troy – Married Joint
*Assumes $150,000 of taxable income outside of plan
Mary Troy
401(k) + PSP + CB $101,000 $95,000
Annual Tax Deferred $52,300 $16,700
Accum to 65 at 6% $2,122,500 $2,936,000
Pre-tax annual benefit $183,100 $253,300
Post-tax annual benefit* $120,500 $185,600
After-tax savings w/o plan $65,700 $72,500
Capital gains tax (23.8%) $103,100 $204,600
Post-tax accum to 65 @ 6% $1,249,700 $1,960,600
Post-tax annual benefit $107,800 $169,100
Better/(worse) with plan $12,700 $16,500
Name W2 Comp QBITaxable Income
Mary Jones $250,000 $180,000 $420,000
Troy Smith $250,000 $120,000 $370,000
Jane Doe $70,000 N/A N/A
John Thomas $60,000 N/A N/A
Tom Jones $60,000 N/A N/A
Mary Williams $50,000 N/A N/A
Bill Brown $50,000 N/A N/A
Laura Miller $40,000 N/A N/A
TOTAL $830,000 $300,000 $790,000
Projected CensusTwo Years Later
Name W2 Comp QBI Deferral Safe HarborProfit
SharingTotal
Mary Jones $250,000 $180,000 $24,500 $7,500 $29,000 $61,000
Troy Smith $250,000 $120,000 $24,500 $7,500 $29,000 $61,000
Jane Doe $70,000 N/A $5,000 $2,100 $1,400 $8,500
John Thomas $60,000 N/A $5,000 $1,800 $1,200 $8,000
Tom Jones $60,000 N/A $3,000 $1,800 $1,200 $6,000
Mary Williams $50,000 N/A $2,000 $1,500 $1,000 $4,500
Bill Brown $50,000 N/A Not Elig. Not Elig. Not Elig. Not Elig.
Laura Miller $40,000 N/A Not Elig. Not Elig. Not Elig. Not Elig.
TOTAL $830,000 $300,000 $64,000 $22,200 $62,800 $149,000
Projected CensusSafe Harbor 401(k) Plan (NEC) + New Comp Profit Sharing
Projected Census(Two Years Later)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
Filing as Single Individual
*Allocable share based on 60/40 ownership split
Mary Troy
W2 Comp $250,000 $250,000
QBI $180,000 $120,000
Less Deferrals -$24,500 -$24,500
Less ER Contribution* -$51,000 -$34,000
Adjusted QBI $129,000 $86,000
Taxable Income $354,500 $311,500
Less QBI Deduction -$0 -$0
Net Taxable Income $354,500 $311,500
Less Income Tax -$99,765 -$84,715
Take Home Pay $254,735 $226,785
Projected Census(Two Years Later)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
Filing as Single Individual
*Assumes $100,000 of taxable income outside of plan
Mary Troy
401(k) + PSP $61,000 $61,000
Annual Tax Deferred $31,700 $25,700
Accum to 65 at 4% $916,600 $1,331,300
Pre-tax annual benefit $66,000 $95,900
Post-tax annual benefit* $49,500 $69,800
After-tax savings w/o plan $39,700 $39,700
Capital gains tax (23.8%) $38,400 $67,700
Post-tax accum to 65 @ 4% $564,300 $802,300
Post-tax annual benefit $40,700 $57,800
Better/(worse) with plan $8,800 $12,000
Projected Census(Two Years Later)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
Mary - Single Individual
Troy – Married Joint
*Allocable share based on 60/40 ownership split
Mary Troy
W2 Comp $250,000 $250,000
QBI $180,000 $120,000
Less Deferrals -$24,500 -$18,500
Less ER Contribution* -$51,000 -$34,000
Adjusted QBI $129,000 $86,000
Taxable Income $354,500 $311,500
Less QBI Deduction -$0 -$17,200
Net Taxable Income $354,500 $294,300
Less Income Tax -$99,765 -$59,211
Take Home Pay $254,735 $252,289
Projected Census(Two Years Later)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
Mary - Single Individual
Troy – Married Joint
*Assumes $100,000 of taxable income outside of plan
Mary Troy
401(k) + PSP $61,000 $61,000
Annual Tax Deferred $31,700 $27,400
Accum to 65 at 4% $916,600 $1,331,300
Pre-tax annual benefit $66,000 $95,900
Post-tax annual benefit* $49,500 $74,900
After-tax savings w/o plan $39,700 $46,400
Capital gains tax (23.8%) $38,400 $79,900
Post-tax accum to 65 @ 4% $564,300 $938,000
Post-tax annual benefit $40,700 $67,600
Better/(worse) with plan $8,800 $7,300
Name Deferral Safe HarborProfit
SharingCash
BalanceTotal
Mary Jones $24,500 $7,500 $29,000 $100,000 $161,000
Troy Smith $24,500 $7,500 $29,000 $100,000 $161,000
Jane Doe $5,000 $2,100 $1,400 $1,000 $9,500
John Thomas $5,000 $1,800 $1,200 $1,000 $9,000
Tom Jones $3,000 $1,800 $1,200 $1,000 $7,000
Mary Williams $2,000 $1,500 $1,000 $1,000 $5,500
Bill Brown Not Elig. Not Elig. Not Elig. Not Elig. Not Elig.
Laura Miller Not Elig. Not Elig. Not Elig. Not Elig. Not Elig.
TOTAL $64,000 $22,200 $62,800 $204,000 $353,000
Projected CensusSafe Harbor 401(k) Plan (NEC) + New Comp + Cash Balance
Projected Census(Two Years Later)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
+ Cash Balance
Filing as Single Individual
*Allocable share based on 60/40 ownership split
Mary Troy
W2 Comp $250,000 $250,000
QBI $180,000 $120,000
Less Deferrals -$24,500 -$24,500
Less ER Contribution* -$173,400 -$115,600
Adjusted QBI $6,600 $4,400
Taxable Income $232,100 $229,900
Less QBI Deduction -$0 -$0
Net Taxable Income $232,100 $229,900
Less Income Tax -$56,925 -$56,155
Take Home Pay $175,175 $173,745
Projected Census(Two Years Later)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
+ Cash Balance
Filing as Single Individual
*Assumes $100,000 of taxable income outside of plan
Mary Troy
401(k) + PSP + CB $161,000 $161,000
Annual Tax Deferred $74,500 $54,300
Accum to 65 at 4% $2,419,200 $3,513,800
Pre-tax annual benefit $174,300 $253,100
Post-tax annual benefit* $120,900 $172,100
After-tax savings w/o plan $104,700 $104,700
Capital gains tax (23.8%) $101,300 $178,700
Post-tax accum to 65 @ 4% $1,489,300 $2,117,400
Post-tax annual benefit $107,300 $152,600
Better/(worse) with plan $13,600 $18,500
Projected Census(Two Years Later)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
+ Cash Balance
Mary - Single Individual
Troy – Married Joint
*Allocable share based on 60/40 ownership split
Mary Troy
W2 Comp $250,000 $250,000
QBI $180,000 $120,000
Less Deferrals -$24,500 -$24,500
Less ER Contribution* -$173,400 -$115,600
Adjusted QBI $6,600 $4,400
Taxable Income $232,100 $229,900
Less QBI Deduction -$0 -$880
Net Taxable Income $232,100 $229,020
Less Income Tax -$56,925 -$50,586
Take Home Pay $175,175 $179,314
Projected Census(Two Years Later)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
+ Cash Balance
Mary - Single Individual
Troy – Married Joint
*Assumes $100,000 of taxable income outside of plan
Mary Troy
401(k) + PSP + CB $161,000 $161,000
Annual Tax Deferred $74,500 $36,000
Accum to 65 at 4% $2,419,200 $3,513,800
Pre-tax annual benefit $174,300 $253,100
Post-tax annual benefit* $120,900 $190,600
After-tax savings w/o plan $104,700 $116,800
Capital gains tax (23.8%) $101,300 $199,400
Post-tax accum to 65 @ 4% $1,489,300 $2,362,500
Post-tax annual benefit $107,300 $170,200
Better/(worse) with plan $13,600 ($20,400)
Projected Census(Two Years Later)
Safe Harbor 401(k) Plan +
New Comp Profit Sharing
+ Cash Balance
Mary - Single Individual
Troy – Married Joint
*Assumes $100,000 of taxable income outside of plan
Mary Troy
401(k) + PSP + CB $161,000 $161,000
Annual Tax Deferred $74,500 $36,000
Accum to 65 at 6% $2,716,100 $4,133,300
Pre-tax annual benefit 234,300 $356,500
Post-tax annual benefit* $159,900 $259,200
After-tax savings w/o plan $104,700 $116,800
Capital gains tax (23.8%) $161,700 $217,500
Post-tax accum to 65 @ 6% $1,625,000 $2,669,100
Post-tax annual benefit $140,200 $230,200
Better/(worse) with plan $19,700 $29,200
Pension Geeks, Inc.
• Assume…
– AGI prior to plan contributions for both Mary Jones and Troy Smith is $500,000 each
– Pension Geeks, Inc. makes no retirement plan contributions for 2020
• How much tax would be paid by Mary and Troy?
Pension Geeks, Inc.
• Pension Geeks, Inc. profits would increase by $252,000 (amount of employer contributions)
– An additional $126,000 would pass through to Mary and Troy
– Additional tax paid by Mary would be $44,100
• 35 percent of $126,000
– Additional tax paid by Troy would be $43,320
• (35 percent of $100,000 plus 32 percent of $26,000)
– Neither Mary or Troy would be eligible for a pass-through deduction
• How would the $126,000 get tax if Pension Geeks, Inc. was a C Corp?
• All C Corp profits are subject to a 21 percent tax rate
• Pension Geeks, Inc. would pay corporate tax of $26,460
• The C Corp profit net of tax would be paid out as a dividend
Pension Geeks, Inc.
• Net profit (after taxes) of $99, 540 would be paid out as dividend
• The dividend would be subject to a long-term capital gains rate of 20 percent
• Tax paid on the dividends would be $19,908
Pension Geeks, Inc.
Pension Geeks, Inc.
S Corp
Mary $44,100
Troy $43,320
Total Tax $87,420
C Corp
Paid by corp $26,460
Dividends $19,908
Total Tax $46,368
Questions?
