LLC, which is treated as a partnership, maintains a Cash Balance Plan and a PSP/401(k). Chief Executive Officer employee works full time for LLC and receives compensation of at least $245,000. LLC expects a partnership operating loss for 2009, a portion of which will be allocated to the CEO.

For qualified plan purposes, is the CEO's compensation $245,000 or is it $245,000 less her share of the LLC losses for 2009?

Thanks.

I guess you mean that she got "wages" of at least $245K that will be shown on a W-2, and she is also a partner. As has been noted here elsewhere, partners generally aren't supposed to be paid as employees, but apparently it's done all the time. I would definitely net the wages and loss.

On the other hand, if the $245,000 was a cash draw not shown on a W-2, her earned income for plan purposes may be the loss.

It's not unusual for a member of an LLC to receive guaranteed payments (which is what the $245,000 likely is) and then have a loss on the K-1. The compensation for qualified plan purposes is the net of the two. If the loss is large enough it's possible for the CEO to have 0 compensation.

We have several situations for 2009 that are likely to result in this same scenario.