ratherbereading Posted June 4, 2020 Report Share Posted June 4, 2020 I have a 403(b) plan who calculates their matching contribution each year using compensation as of their fiscal year (e.g. this year's match calculated on comp from 7/1/2019 - 6/30/2020). Their plan year is 1/1 - 12/31. They have done this since before I came on board. Is there anything wrong with doing this? The document does not address other than to say the matching contribution shall be determined by the employer with respect to each plan year. Compensation is W2 wages increased by elective deferrals for all contributions/no exclusions. 4 out of 3 people struggle with math Link to comment Share on other sites More sharing options...
C. B. Zeller Posted June 4, 2020 Report Share Posted June 4, 2020 Check the plan document again, it should define a "Compensation Measurement Period" or "Compensation Computation Period." It might be through a reference, for example it might say that the compensation measurement period is the limitation year, so then you would have to check the definition of limitation year. But as long as the document says that compensation is measured for the fiscal year ending in the plan year, or similar, it should be fine. Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance. Corey B. Zeller, MSEA, CPC, QPA, QKA Preferred Pension Planning Corp.corey@pppc.co Link to comment Share on other sites More sharing options...
ratherbereading Posted June 4, 2020 Author Report Share Posted June 4, 2020 8 minutes ago, C. B. Zeller said: Check the plan document again, it should define a "Compensation Measurement Period" or "Compensation Computation Period." It might be through a reference, for example it might say that the compensation measurement period is the limitation year, so then you would have to check the definition of limitation year. But as long as the document says that compensation is measured for the fiscal year ending in the plan year, or similar, it should be fine. Thank you! 4 out of 3 people struggle with math Link to comment Share on other sites More sharing options...
MWeddell Posted July 24, 2020 Report Share Posted July 24, 2020 For a profit-sharing plan, there must be a definite, predetermined allocation formula, so the plan document ought to state how contributions are allocated. Not sure though whether that requirement applies to 403(b) plans without researching it. One can have the match determined based on fiscal year compensation, but it opens up the possibility of more widespread 415 limit failures if the limitation year is the plan year. Also, it may yield odd ACP test results because the ACP test will use plan year compensation. Link to comment Share on other sites More sharing options...
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