Guest Sabadee! Posted August 12, 2008 Share Posted August 12, 2008 Is it permissable to use a modified compensation definition for this test? Can I reduce compensation for 125 & 401(k) deferrals? Link to comment Share on other sites More sharing options...
J Simmons Posted August 16, 2008 Share Posted August 16, 2008 I don't think so. The 55% average benefits test applies only to the day care flex accounts in a cafeteria plan. IRC § 129(d)(8) provides that the definition of compensation be IRC § 414(q)(4), which keys it to the definition in IRC § 415©(3). IRC § 415©(3)(D) includes in that definition elective deferrals and deductions under IRC § § 125, 132(f)(4), 402(g)(3) and 457. Note also that for cafeteria plan discrimination purposes, Prop Treas Reg § 1.125-7(a)(2) uses the IRC § 415©(3) definition as well. John Simmons johnsimmonslaw@gmail.com Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now