Safe Harbor Match -Comp Definition

[Guest Cheri_Rose]

Does compensation used to calculate matching contributions in a safe harbor plan have to match the compensation eligible for deferral?

[Jim Chad]

Page 11.451 of the ERISA outline says that the statute does not require any specific definition of Comp with safe harbor plans. It then goes on to say that the IRS has clarified that the definition should be a safe harbor definition under 1.414 or else you will have to satisfy nondiscrimination testing on the comp definition.

It seems to me that you can have quite a bit of flexibiltiy in the two definitions being different.

[Guest gsi miami]

If you exclude B-O-T from comp, and fail the comp ratio test--do you need an amendment to bring back in the BOT? Is it dependant on the doc language? I am looking at a corbel doc--i beleive it says the plan can add back the BOT w/out an amendment.

any thoughts? cites?

[Tom Poje]

for a safe harbor 401k, what comp test would need to be run?

the regs even give an example of excluding overtime.

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

as long as an employee has a chance to receive the max match you dont have a problem

[Guest gsi miami]

Tom, i see cheri was talking about a sh match plan--what about just p/s plan or non-sh 401k? same ?

[Tom Poje]

if you fail 414(s) test, then you can not run your adp test (or whatever) using plan's definition of comp (e.g. exclude bonus)

you would have to test using a definition of comp that satisfies 414(s). thus, someone who deferred 5% of (comp - bonus) when tested would be less than 5% because you use total comp. this of course could cause the plan to fail testing. (of course you could use comp - all deferrals in testing because that satisfies 414(s) as well)

good question.