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Showing results for tags 'excluded compensation'.
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We have a client whose plan excludes fringe benefits from the definition of compensation under the 414(s) safe harbor alternative definition of compensation on an FT William document. Some of the things that the client believes are "fringe benefits" are not what I think is a fringe benefit. Neither the adoption agreement nor the base plan document defines fringe benefit. FT William says they can't give tax advice. Treas. Reg. 1.414(s)1(c)(3) also mentions fringe benefits but fails to define that term. Does anyone have a good reference that I can provide to my client?
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Employer has 1 HCE (the owner) and 75 eligible NHCEs. Wants to adopt a 3% safe harbor 401(k) plan. Owner's compensation is normally paid as $120,000 base pay and $150,000 year-end bonus. The NHCEs receive tips amounting to about 50% of their compensation. If the plan excludes bonuses and tips for purposes of all allocations, would this still retain its safe harbor status? If so, it seems like the employer is getting away with a safe harbor contribution of only 1.5% of compensation. We understand that it might eventually become top heavy with all the turnover they have, but that could take several years.
