Definition of Compensation for ADP-ACP Test

[Guest CRM]

Hi, if a 401(k) plan excludes bonuses from the definition of compensation for purposes of elective deferrals and match, do bonuses also need to be excluded from the definition of compensation for purposes of the ADP/ACP Test? For example, if a highly compensated employee made $150,000 in base salary and a $50,000 bonus and deferred $15,000, does the ADP test base compensation on $150,000 or on $200,000 (base plus bonus).

[BG5150]

I would check the plan document. Some docs specify the compensation to use, but some allow you to test using any compensation that passes 414(s).

[MWeddell]

I would add that if you do use the plan's definition of compensation, the one that excludes bonuses, for ADP / ACP testing, then you'll have to make sure that it is a 414(s) definition of compensation, which sometimes requires a 414(s) test.