404 Comp under EGTRRA

[KJohnson]

As I always undertood it the reason for excluding 125 Plan salary reductions under the definition of compensation for deductibility under 404 was that since 401(k) elective deferrals were employer contributions and therefore excluded from the definition of comp under the language of 404 and 1.404(a)-(9)(B)(2) and since amounts under a 125 salary reduction were kinda-like 401(k) deferrals they should also be excluded in the definition of comp. The only thing I ever found on this was PLR 9225038 Was there ever anything else?

Now, under EGTRRA it is clear that elective deferrals are not taken into account in determining the amount of contribution subject to the 15% limit, but I assume the rule relating to the definition of compensation remains the same--elective deferrals and salary reductions to a 125 plan are excluded from the definiition of compensation for 404? Is this correct?

[Tom Poje]

no.

sec 616 of EGTRRA added paragraph 12 to section 404(a) ...

"for purposes of paragraphs 3,7,8 and 9 the term compensation shall include amounts treated as compensation under paragraph C and D of section 415©(3)"

you no longer reduce comp by deferrals!

[KJohnson]

Thanks, I caught 404(n) but did not catch the addition or 404(a)(12).