Substantial Owner Benefit Limitation


Definition of "Substantial owner benefit limitation"

Marguerite Palladino Karamoshos real estate agent
Marguerite Palladino Karamoshos, Real Estate Agent Keller Williams Points North

Restriction on the benefit that owners and other highly compensated individuals may receive from a qualified pension or other employee benefits. The U.S. Tax Code requires that benefits under a qualified plan, and some other benefits, do not unduly favor a business firm's top hierarchy. The tax reform act of 1986 provides a uniform definition of "highly compensated" as an employee who either owned more than 5% interest in the business, received more than $75,000 in compensation, received more than $50,000 in compensation and was in the top 20% of employees as ranked by salary, or was an officer and received compensation greater than 150% of Section 415 defined contribution dollar amount.

 

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