Limit compensation?

[Guest esi-jht]

I'm drawing a blank but I'm thinking I read somewhere that compensation for allocation purposes cannot be limited by the plan document. For example, allocations will not be made on compensation over $50,000. Is this correct? If so, what is the cite. Thank you.

[WDIK]

Treasury Regulation 1.414(s)-1(d)(2)(iii):

(iii) LIMITS ON THE AMOUNT EXCLUDED FROM COMPENSATION.

A definition of compensation is not reasonable if it provides that each employee's compensation is a specified portion of the employee's compensation measured for the otherwise applicable determination period under another definition. For example, a definition of compensation that specifically limits each employee's compensation for a determination period to 95 percent of the employee's compensation using a definition provided in paragraph © of this section is not reasonable. Similarly, a definition of compensation that limits each employee's compensation used to satisfy an applicable provision with a 12-month determination period to compensation under a definition provided in paragraph © of this section for one month is not a reasonable definition of compensation. However, a definition of compensation is not unreasonable merely because it excludes all compensation in excess of a specified dollar amount.

(emphasis added)

This, however, does not necessarily give give a carte blanche.

[Guest esi-jht]

THANK YOU!! That's exactly what I was looking for. I looked up and down through those regs and didn't see it. I really appreciate your help.