k man Posted February 27, 2002 Posted February 27, 2002 In prior years the plan exluded commissions from the definition of compensation. The employer know wants to use full compensation. Is it possible incorporating a more inclusive definition of compensation to be a cut back of benefits? For example, if this change benefits HCE's because they earn more commissions.
Guest Jim Kais Posted March 8, 2002 Posted March 8, 2002 I'm not 100% certain, but I think you would have to pass 414s testing. I do not believe that the inclusion of Commissions into your plan document via amendment would be considered a cut-back in benefits.
mbozek Posted March 8, 2002 Posted March 8, 2002 I always though that the IRS preferred the use of the widest definition of compensation to prevent discrimination. So I find it hard to imagine a situation where inceasing the compensation of HCE for benefit purposes would result in a cutback in benefit accruals for NHCEs. Please advise. mjb
Guest Jim Kais Posted March 8, 2002 Posted March 8, 2002 mbozek, I agree with your statement as I also stated that I did not believe the compensation change would be considered a cutback in benefits....
Mike Preston Posted March 8, 2002 Posted March 8, 2002 Isn't this a variation on the same theme as the change in compensation under EGTRRA? If changed after somebody is entitled to a 411d6 protected right in an allocation that is based on the HCE's having a lower compensation threshold, isn't that a potential violation under TAM 8735001?
mbozek Posted March 11, 2002 Posted March 11, 2002 Yes If it is a cut back but what if the change increased the amount of the contributions for the year? mjb
Mike Preston Posted March 11, 2002 Posted March 11, 2002 But it can't, can it? Take the simple exaple of 2 ee's, an HCE with comp of 500k and an nhce with comp of 50k. If you recognize comp in excess of 170k (the pre EGTRRA limit) and allocate comp to comp, the allocation for the HNCE for any given level of contribution will go down. If you allocate on an integrated or new comp basis, then there is a chance that the increased comp wouldn't have resulted in a larger contribution. But it depenss on plan design.
mbozek Posted March 11, 2002 Posted March 11, 2002 Why not just amend to change the definition of comp for the HCE and put in a failsafe clause to prevent any reduction to nhce. mjb
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now