Safe Harbor 401(k) & Excluded Compensation

[buckaroo]

I have a client who has a Safe Harbor 401(k) Plan. They satisfy the safe harbor requirements by making the 3% SHNEC. They have recently asked me to amend the document to exclude bonuses from the definition of compensation. (They no longer want to allow the participant to defer on their bonuses and they no longer want to consider bonuses when calculating the 3% SHNEC.) Aside from the additional compensation testing that needs to be done for excluding bonuses, can this be done? Is it permissible to exclude bonuses in a safe harbor 401(k) Plan?

[Tom Poje]

Comp definition need only be reasonable – not required to satisfy nondiscrimination requirement - see 1.401(k)-3©(6)(iv) and example 3 that follows