Demonstration 9

[Guest carsca]

I was wondering whether someone can clear this up for me:

Pursuant to IRC section 414(s), a plan must have a nondiscriminatory definition of compensation. Therefore, if a 401(k) plan's definition of compensation, for example, counts all pay but not overtime, the plan's definition of compensation must be tested under section 414(s).

My question is this: Does a plan automatically pass 414(s) if it tests ADP/ACP on a safe harbor definition of compensation (like W-2 compensation).

The answer to this question will determine whether a Demo 9 must be submitted for plan that excludes overtime from its definition of compensation.

Thanks in advance.

[Guest qualified plan]

I belieive that a Demo 9 would not need to be done for a 401(k)plan that only excludes overtime from its definition of compensation, provided that the plan passes ADP/ACP using a safe-harbor definition.

However, I also believe (but I am not certain) that a demo 9 would need to be done for a profit sharing plan that has that definition of compensation.

Could someone confirm my analysis?

[Guest carsca]

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