Question

Amber's employer, Lavender, Inc., as a § 401(k) plan that permits salary deferral elections by its employees. Amber's salary is $99,000, and her marginal tax rate is 24% and she is 42 years old. a. What is the maximum amount Amber can elect for salary deferral treatment for2019? $ x Feedback Check My Work The annual limitations on contributions to and benefits from qualified plans appearing in § 415 must be written into a qualified plan. Section 404 sets the limits on deductibility applicable to the employer. The limit on the amount deductible under § 404 may have an impact on the amount the employer is willing to contribute. In fact, a defined benefit plan or defined contribution plan is not allowed a deduction for the amount that exceeds the § 415 limitations. b. If Amber elects salary deferral treatment for the above amount, how much can she save in taxes? Her tax liability for 2019 would be reduced by $ Feedback Check My Work Incorrect c. What is the recommended amount that Amber should elect as salary deferral treatment for 2019? X .

Answer 1

a. The maximum amount Amber can elect for salary deferral for 2019is $19000.

b. Taxx liability would be reduced by $4,560($19,000 × 24%)

c. Entire $19000 should be elected because the election of the maximum amount saves tax and at the same time maximizes her contribution to her retirement fund.