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Compensation Q


Guest tomaney

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Guest tomaney

Elective deferrals are added to w-2 compensation for purposes of 415. Does this include elective deferrals under a 457(B) non-qualified deferred compensation plan?

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Guest tomaney

Further to above, what I'm aiming for is to have a 414(s) safe harbor compensation definition by adopting 415 definition of compensation - not reduced by deferrals in 403(B) or 457(B).

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Yes, I believe so. A definition of compensation will generally meet the 414(s) criteria even if it is modified to include all of the following types of elective deferrals and all of the following types of deferred compensation: (i) elective contributions not includible in gross income under IRC sections 125, 402(e)(3), 402(h) and 403(B); (ii) compensation deferred under a Code Section 457(B) deferred compensation plan; (iii) Employee contributions under a governmenatl pickup plan described in Code Section 414(h)(2).

Source: Treas. Reg. 1.414(s)-1©(4).

Note: You can also modify the safe-harbor above to exclude certain forms of pay/compensation for the HCE's.

earthy

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Guest tomaney

Thanks earthy - my reading tells me same thing but I need to be sure. It was curious that 414(s) made no reference to 457 when mentioning deferrals that COULD be excluded. Makes you wonder if you even have a choice - i.e. do 457 deferral amounts NEED to be included under 414????

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  • 2 weeks later...

I can understand including elective deferrals under governmental plans, but allowing deferrals under plans of nongovernemtnal entities to be included appears to violate IRC 414(s)(3). Furthermore, the reg. doesn't appear to distinquish between elective and other deferrals.

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