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Newbie here. If an employer's 401(k) plan defines compensation as W2, then (correct me if I'm wrong) - but there could be compensation amounts that will not be on an employee's paystub - but could be reported on the W2. In other words, the amount reflected on an employee's last payroll statement of the year may not necessarily equal the W2 plan compensation amount. I believe the primary difference is the taxable amount of items not paid in cash. Does anyone have any examples? So if John is paid $5,000 monthly (gross) - his last payroll statement will show $60,000. If he deducts 3% of of pay to his 401(k), then each paycheck will see $150 contributed as an elective deferral, for a year-end total of $1,800. (3% of $60,000 is $1,800). But what if his W2 compensation is $66,000? I believe his deferrals should be $1,980 for the year. How does an employer typically account for this in their payroll?
