401(k)

[Guest rfemmons]

Can an employer pay the income tax for the HCEs when they receive a corrective distribution as a result of the correction of an ADP test without violating an nondiscrimination rules? The employer plans to do a true up to pay for the additional tax on the payment of the tax, etc.

[Mike Preston]

Compensation is not subject to discrimination rules. If the employer decides to bonus an amount to certain employees it should be ok. What would NOT be ok would be to say that if one deferred monies into the 401(k) plan the employer would provide a benefit (such as an increased level of compensation). That would violate the 401(k) rule that precludes basing something other than a match on employee deferrals.