What is the definition of compensation for a SIMPLE IRA?

[Guest Cindy A. Steiner]

What exactly is the definition of compensation under a 5304-SIMPLE plan if the employee participates in a Section 125 plan (for the employer adopting the SIMPLE)? Example: Gross Pay=$30,000, Sec. 125 withholding for daycare, medical spending, and insurance premiums=$10,000. Compensation subject to Federal Income Tax (before SIMPLE deductions) = $20,000.

[jaemmons]

Under IRC 408(p) it refers to compensation as defined in IRC 6051(a) with pretax contributions to 401(k)'s, 457, SARSEP's and 403(B) added in. There are no references to adding back IRC 125 deductions, so I would say that $20,000 is the comp amount to be used.