Deferrals and safe harbor contributions on car allowances

[Guest maddie]

A client selected W-2 wages as the definition of compensation for 401(k) Plan purposes. Several employees have car allowances that are included in W-2 wages box 1. Wouldn't this mean that they should be deferring their applicable % for 401(k) purposes as well as making the 3% safe harbor contribution on the total amount of W-2 wages?

[jaemmons]

As long as the plan's definition of compensation includes all wages reported on the W-2, I would agree that deferrals should be taken out of the car allowance payments, along with applying the safe harbor NE 3% to these wages.