From 5300 - Demo 9

[Guest slt]

The Demo 9 Instructions are asking me to provide the 415©(3) definition of compensation used in determining total compensation (for purposes of computing the individual ratios). The actuary is telling me that they used the W-2 definition BUT DID NOT INCLUDE DEFERRALS OR ELECTIVE CONTRIBUTIONS.

I know the 415 regulations intimate that your definition can exclude these contributions but aren't these regulations outdated and didn't GUST amend 415©(3) to specifically add these back in? And, wouldn't this apply to the TOTAL COMPENSATION determination under Demo 9? Does this mean, then, that the question of whether you have added deferrals into the definition of total compensation is a trick question on the Demo 9 and that stating NO would be cause for a bounce-back from the IRS?

I appreciate any response! Thanks.

[Guest earthy]

I would ask the actuary if the plan was tested for non-discrimination using an alternative definition of compensation as is permitted under the 414(s) regulations. If so, a demonstration should accompany your determination letter filing showing that this definition does not discriminate in favor of the prohibited group.

You are correct in that both SBJPA '96 and TRA '97 made modifications as what should be included as compensation for purposes of the 415©(3) safe-harbor. However, not all plans operate within that safe-harbor.

earthy