EGTRRA impact on compensation limit

[Guest Ralph]

Can a plan sponsor elect to increase their plan's compensation limit for testing purposes only? In effect, contributions would be based on $170,000.

[Tom Poje]

lets look at your question from another poimt of view.

testing must be done on a definition of 414s compensation, not allocation comp. And that definition can be from date of entry (e.g. 7/1) even if you gave someone a top heavy allocation which is based on full year comp. so allocation comp has nothing at all to do with testing comp.

of course, if your allocation comp is different it still must pass one of the safe harbor definitions or you perform the compensation test to prove nondiscrimination.

the way you worded your question doesn't sound quite right. the company is not electing to increase their plan's compensation limit for testing. the company is following the regs and using the comp limit as required by the law. the company can amend the plan to limit comp for allocation purposes to 170,000, and since that discriminates in favor of the NHCEs you should be ok.

at least that would be my understanding of the regs.