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Definition of comp. for deferral purposes


Guest Frankie
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When determining compensation for salary deferral purpose in a 403(B) or 457 plan, if the participant is making mandatory contributions into a defined contribution plan of the employer are such contributions counted in the definition of compensation ?

Would the answer be different of the mandatory contributions were "picked up by the employer".

Would the answer be different if the mandatory contributions were going into a defined benefit plan ?

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Guest Ralph Amadio

Although the plan document is a key factor in governmental plans, the "final say" tends to belong to the State government. Some states carefully define contribution inclusion in compensation, usually to prevent pension earnings credit loss in their PERS and TRS programs, some ignore the issue, and yet others have prohibitions against any form of plan other than the State system. Carefully check with legal counsel to determine the status of the law in this jurisdiction.

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One caveat here--although applicable state and local law, and the plan document, define compensation for purposes of calculating a contribution formula (e.g. , if contributions can be made only in multiples of 1% of compensation), the Internal Revenue Code defines compensation for purposes of the exclusion allowance (through 2001) and section 415 limits. For this purpose, non-picked-up employee contributions would be part of compensation, but picked up employee contributions would not.

Employee benefits legal resource site

The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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Guest Ralph Amadio

Thank you for the caveat. This is a strong reason to collectively bargain these benefits as employer contributions whenever possible.

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