Simple/401(k) plans

[Jesse]

If a LLC filing as a partnership sets up a Simple or 401(k) plan would the guaranteed payments be considered as wages for setting limitations such as maximum contributions allowed?

Also, if the employer matches employee's 2%, the 2% match for each of the LLC members does not reduce income subject to SE?

[sea-tax]

If a LLC filing as a partnership sets up a Simple or 401(k) plan would the guaranteed payments be considered as wages for setting limitations such as maximum contributions allowed?

Also, if the employer matches employee's 2%, the 2% match for each of the LLC members does not reduce income subject to SE?

jesse most of what you need to know is in the TTB on page 13-17 and 13-18 and also you can check out IRS pubs 560 and 590


The way I understad it is that contributions for LLC memebers or self-employed individuals are based on net self-employed earnings.

[Brad Imsdahl]

The partnership example starting on page 20-12 includes the example of making SIMPLE IRA contributions for a partner. The example is a partnership that is not an LLC. So the difference between the example in TTB and an LLC depends on what you treat as Self Employment earnings.

All retirement plan contributions for a self employed partner are based on total Self employed earnings that flow through the partnership to the partner. If you take the position that an LLC member is only subject to SE tax on guaranteed payments and not line 1 of the K-1, then for retirement plan contribution purposes, you can only figure the employer's match and elective deferrals based on the guaranteed payments. But if the LLC member or partner is subject to SE tax on both guaranteed payments and line 1 K-1 profits, then both amounts are used in figuring the retirement plan contributions. Self employment for retirement plan purposes means the compensation subject to SE tax.