SIMPLE COMPENSATION

[Guest nicola]

I believed that compensation used to deteremine employer matching contributions for SIMPLE-IRA plans had to be computed on the cash basis and therefore agree to the participants W-2s. An investment advisor believes that participants compensation must be (or can be) computed using the accrual method (i.e. wages earned in 2002 but paid in January 2003 are included in the participants comp when determining the employers 2002 matching contribution). I can not find any regs or notices on point to prove her wrong. Can you site any authoritative code or regs to settle this?

[Appleby]

Nicola,

To support your interpretation, you may cite [iRS Notice 98-4, 1998-2 IRB 26, Q&A D-4]