PS Contribution on only Bonus Pay

[Guest milehighheel]

I have a client that would like to make their discretionary PS contribution in a manner that defines compensation as only including bonus pay. Assuming that this definition of compensation would pass the 414(s) test is this allowed? We currently use a prototype document that contains an "other" line that allows for adjustments when defining compensation. Could you simply write in that for purposes of PS only bonuses will be taken into account and all other forms of compensation will be excluded?

Thanks for the help!

[austin3515]

I would say yes, but there's one thing that's sticking in my head. And that is that the employer has total discretion to allocate bonuses however they want, and therefore can allocate PS however they want, which might be argued to violate the requirement that the allocation of contriubtions are definitely determinable.

But if my contrarian view has no basis, then you should be fine!

[Bird]

Yeah, I think it's ok but as Austin notes it could be argued that the allocation is indeterminable.

And I'm honestly not sure the extent to which you can rely on writing text into an "other" box on a prototype but to me, it at least stretches the spirit of what they want you to be able to do. I'd be more inclined to do an "every person in their own group" plan instead of messing around with some oddball scheme, but that's just my 2 cents.

[austin3515]

But on a PT document, everyone in their own group limits the number of allocation groups you're allowed. So based on gross pay, each participant could be in their own allocation group if the operational intent is to use only bonus.

But hey, maybe a VS document would work?

Definitely aggressive no matter how you slice it...

[Bird]

Yes, I was thinking volume submitter.