What to include as compensation

[Santo Gold]

The 401(k) plan document defines compensation as W-2 wages. Question 1: On line 1 of the W-2, should this figure inlcude or exclude deferred compensation amounts? Question 2: This is an S-Corp, so the owners health insurance gets added back into to the Box 1 figure, but is excluded for FICA wages. Should these amounts be added back into Box 1 for plan compensation?

Thanks for any help.

[Santo Gold]

Got the answer to Question 1: Deferred Comp contributions are not included for W-2 wages. I am still struggling with Question 2. Thanks.

[Tom Poje]

but make sure you read the whole definition of comp in the document.

usually there is a paragraph that 'adds back in deferrals'.

[Santo Gold]

Thanks for the caution Tom. Do you normally see non-qualfied deferred compensation added back in? I checked the document and for compensation, treatment of elective deferrals. It talks about including elective deferrals as compensation pursuant to 125 - cafeteria plan, 402(e)(3) -qualified plan CODA, 402(h)(1)(B) - SEP, and 403(b), as well as 132(f)(4) - taxable transportation fringe. Nothing about about adding back in NQDC.

Also, would agree that when asking for W-2 wages, that means box 1 of the W-2 (wages, tips, and other compensation), rather than box 3 (Social Security wages) or box 5 (Medicare wages)? I looked at 6051 definition seems to say that, without exactly saying that.

Thanks

[Tom Poje]

yes, I would say if the document says use W-2 comp this means box 1 - otherwise the statement 'add back in deferrals' makes no sense