Homework Answers
Solution :
As per the IRS, for the year 2019, the maximum contribution that can be made by an employer towards a profit sharing plan (for the employee) is the lower of
a.25 % of Compensation / salary
b.$ 56,000
As per the information given in the question
Bill’s salary = $ 65,000
Thus 25 % of salary = 25 % * $ 65,000
= $ 16,250
The lower of $ 16,250 and $ 56,000 is $ 16,250
Thus the maximum contribution that can be made by an employer towards a profit sharing plan is $ 16,250
The solution is Option 3. $ 16,250
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