Per Pay Match to Partners

[WesleyT]

Facts:

A partnership maintains a 401(k) plan in which the partners have previously never contributed.

The partners now want to contribute deferrals periodically from their draws.

The plan provides for a per pay match with no true-up.

The plan accordingly defines compensation for matching contributions based upon pay periods.

The partners want to avoid implementing a true-up if possible.

Question:

How do I determine the match for the partners (what compensation is used)?

Is it just based off the draw? Technically, the partners could have earned income that is lower than the draw. Does that matter?

Thanks in advance for any help.

[Bird]

That's a tough one, but I'd say the partners have no income for any pay period except the last one of the year. I would definitely not use a draw as compensation.

We never, ever do p/r match w/o true-ups, but I remember one of the requirements for doing so is that you must make the deposit by the end of the following quarter. That might prove problematic for the partners as you may not have their self employment income by then.