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Shaun works for ABC Company. His total compensation for 2018 was $400,000. ABC Company has a...

Shaun works for ABC Company. His total compensation for 2018 was $400,000. ABC Company has a profit sharing plan with a contribution that is integrated with social security. The integrated profit sharing formula has a base contribution of 5%, uses the current social security taxable wage base as the integrated level, and uses the maximum excess percentage. What is the excess percentage that will be applied to Shaun’s compensation above the integration level?

a. 5%
b. 5.7%

c. 10%

d. 10.7%

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Answer #1

Compensation for the year = $400,000

Base contribution = 5%

Ans : b) 5.7%

In an integration system, the compensation is calculated as an excess and valued as a percentage of the Taxable Wage Base(TWB). Business owners often criticise this method saying that it increases cost burden of employees to the company. In any case the maximum disparity percentage under the TWB Integration system is fixed at 5.7%.

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