Individual limit
How much room does the owner have?
Employee deferrals, safe harbor contributions, matching contributions and other annual additions can already be using part of the owner’s limit.
See the owner-contribution frameworkFor CPAs / 401(k) profit sharing
When a client asks, “How much can I put into profit sharing?”
Turn the tax-planning question into a retirement-plan design comparison: owner target, employee funding, allocation method and the testing that still has to be completed.
EDUCATIONAL TOOLS TODAY / CASE-SPECIFIC DESIGN WORKFLOW IN DEVELOPMENT
The handoff should stay simple
The clientDefines the owner goal and acceptable employer budget
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The CPAFrames the tax-planning question and compensation facts
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NewComparability.comTranslates the objective into plan-design scenarios and testing questions
FOCUSED RESOURCE / NOT A REPLACEMENT FOR THE CLIENT’S TPA, RECORDKEEPER OR TAX ADVISOR
The question behind the question
“How much can I contribute?” is usually two separate questions.
First: how much contribution room does the owner have? Second: what employer funding is required for the rest of the plan if the owner wants to reach a specific target?
Plan design
What does the owner target cost the business?
A pro rata formula and a New Comparability allocation can produce very different employee funding for the same owner contribution objective.
Compare profit-sharing allocation methodsA planning example
Keep the owner target constant. Compare the employer cost.
Assume one owner earns $300,000 and wants a $45,000 employer contribution. Three eligible employees earn $150,000 in total.
Same owner target. Different allocation question.Illustrative
EMPLOYER PROFIT-SHARING DOLLARS / NOT A COMPLETED COMPLIANCE TEST
| Illustration | Owner | Employees | Total employer funding |
|---|---|---|---|
| Pro rata at 15% | $45,000 | $22,500 | $67,500 |
| New Comparability illustration | $45,000 | $7,500 | $52,500 |
The second row assumes a 5% employee allocation for illustration only. A real case requires the full census, plan document and nondiscrimination analysis.
What to collect before the design conversation
Five facts make the handoff materially better.
- Owner objective: the actual employer-contribution target, not automatically the statutory maximum.
- Employee census: age, eligible compensation and the full population that may affect testing.
- Ownership and family relationships: enough detail to identify HCE and related-business issues that may change the analysis.
- Existing employer contributions: safe harbor, match or other nonelective amounts already funded or expected.
- Plan document: the current allocation provisions and any restrictions the provider is administering.
Useful now
Answer the client’s first question without pretending the preliminary math is the final answer.
Profit sharing 101
Start with the contribution structure.
Explain what profit sharing is, how it differs from a match and how allocation methods change the result.
Read the profit-sharing guideScenario tool
Put the owner target and employee cost side by side.
Use hypothetical inputs to frame the economic question before a case-specific analysis.
Open the calculatorWorked examples
See how the same question changes by workforce.
Review fixed budgets, owner targets, safe-harbor funding and larger employee populations.
See six allocation examplesA dedicated profit-sharing design workflow is in development.
Join the waitlist as a CPA for early-access updates. No client census or personal data is requested through the waitlist.