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SARSEP Testing?


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Is the top 20% paid group limitation available when testing SARSEP's? When defining compensation, do either the government form or any prototypes allow net compensation (not grossed up for deferrals and 125 contributions)to be used for allocating contributions, like qualified plans?

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Upon reading the instructions to Form 5305A-SEP, it appears that the definition of compensation is section 3401(a), except for the $450 eligibility, which includes salary deferrals and cafeteria contributions. Does this mean that an employee who earns $30,000 and defers $2,000 is allocated the employer contribution on $28,000? This is contrary to the qualified plan 415 rules.

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