Deductible Compensation

[Lori Foresz]

Hi,

New plan established 4/1/03. Can the employer consider compensation paid prior to 4/1/03 in determining the 25% deductible limit? The definition of plan compensation excludes compensation prior to the effective date of the plan, but for deduciton purposes, I was hoping to use full year pay.

Any help would be greatly appreciated.

Thanks!!!

[Mike Preston]

The deduction limits are always based on compensation paid during the fiscal year, aren't they? Plan compensation has nothing to do with it, does it?

[Lori Foresz]

Hi,

I definitely know that the definition of plan compensation does not dictate the definition for deduction purposes. For example, plan comp could exclude overtime, bonuses, yadeeya....but deduction comp is a differently defined animal.

BUT, I still don't know if the employer can take into account compensation before the effective date of the plan to determine deductibility. Where is my ERISA outline book when I need it.

Thanks for the input.