Imputed income and IRC 3401 definition of comp

[Guest Serena]

Employer provides company car but then employee incurs an imputed income tax on use of this car. How does imputed type income affect plan contributions? Employer wishes to exclude this type of income from plan compensation. Since the employee does not receive this as cash there is no tax withholding so if plan uses the IRC 3401(a) tax withholding definition as 414(s) comp will the imputed income be a non-issue? If not, plan will need to specifically exclude, and then do comp ratio test if necessary.

Are there any CPA's out there who may know?

Thanks!

[david rigby]

How does imputed type income affect plan contributions?

Almost always this question is answered by the plan's definition of compensation.

[Guest Serena]

Client is amending their plan to add safe harbor next year. They will be providing this imputed income next year, so we are trying to find a way not to exclude comp from a safe harbor plan. The document we use does not allow comp exclusions, otherwise you have to go outside the parameters of the prototype and do an IRS filing.

I wonder if using the safe harbor fringe benefit exclusion if this special pay would be picked up in that definition as a fringer benefit, which can be cash or non-cash per the definition.