Question: The four owners of Xcite Company all elected 15% of their compensation while the other employees as of that date had an average deferral of 5%.
Owners will receive $200,000 of salary throughout the year and have the potential to earn up to another $200,000 in bonuses. The bonuses will be paid in the year following the corporate year end of December 31 based on the financial performance and achieving certain milestones for the corporation during the year. Likewise, the office manager, your friend Michael, and the business development executive are also under a bonus program based on $75,000 salary and $100,000 base salary respectively where they will be paid bonuses of zero to $20,000 and 0 to $100,000 respectively. The first bonuses will be paid in 2018 for the 2017 calendar year. There are 20 other employees who handle shipping and distribution but they earn between $25,000 and $60,000.
According to the rule §402(g)(1)(A): $18,000 deferral limit and potential excise tax penalty on excess deferrals (2017) §414(v): $6,000 catch up limit for over 50 years of age (2017) Calculate salary and bonus in following years.