A small employer incurs $31,500 for consulting fees related to establishing a qualified retirement plan for its 75 employees.As a result, the employer may claim the credit for small employer pension plan startup costs for $750.

Question

Quizplus · Accepted Answer

The credit for small employer pension plan startup costs is calculated as 50% of the total eligible startup costs, up to a maximum credit of $5,000 per year for the first three years of the plan. Therefore, if the employer incurs $31,500 in consulting fees, they could potentially claim a credit of $5,000 (the maximum allowed), not $750.

A Small Employer Incurs $31,500 for Consulting Fees Related to Establishing