PLan compensation

[Gary]

A corporation has 2 employees.

One of the employees is also on the board of directors.

Say the employee receives $100,000 as an employee and $30,000 as a director.

Based on the 414(s) statutory definitions of compensation would the director fees be part of pension compensation?

It seems since the employer is compensating the employee for services on behalf of the employer it would be part of compensation.

I presume the plan can actually include it or exclude it (based on the plan provisions) as long as there is no discrimination based on applying the statutory definition for testing purposes.

Logically, if the director fees were NOT part of the statutory definition of compensation then if the director is a HCE it only serves to help the NHCEs, since we would be using a lower comp for the HCE for testing purposes and thus result in potentially a higher ABP for the HCE.

Thanks.

[No Name]

How is director compensation being reported? W-2 or 1099-Misc? Sometimes, someone else has already made your decisions for you.

[Gary]

The director fees are reported on the personal return, I believe as 1099 and on the Schedule C, but definitely not W-2.

But it is still income from the corporation to the officer, husband and director (though not owner) of the company that is run by just the husband and wife.

[Blinky the 3-eyed Fish]

The facts posted are confusing. The husband and wife run the company and are the only 2 employees, but the husband is not an owner. Is the wife?

Anyway, how it would generally work is that the directors fees are not paid from an employee/employer relationship and that is why they are 1099 income and not W-2. Now where they could be counted for 414(s) purposes is if the entity to which the 1099 income flows into (in this case a sole proprietorship) is in a related group with the employer paying the W-2 wages.

[Kirk Maldonado]

What is implied in the prior posts but not stated explicitly is that income from serving on the board of directors is always self-employment income.

There might be an exception where an executive has an employment agreement that provides for a fixed dollar amount of compensation each year and the duties specified in the contract include serving on the board of directors, but I've not thought through that situation enough to reach a conclusion