compensation used

[Gary]

A participant enters plan midway has total comp of 100k and comp as a participant of 50k for year.

my understanding is that:

gateway can be based on 50k

non discrimination rate group can be based on 50k

top heavy must be based on 100k

deduction limit based on 100k

Agreed?

thanks

[FAPInJax]

I believe the answer is not necessarily. Imagine a DC plan where he becomes eligible on 1/1 to make deferrals but his profit sharing is based on participation compensation from 7/1. Testing is performed on full compensation in that case.

I trust someone will enhance or correct this if my interpretation is off.

[Tom Poje]

I would clarify that the 5% figure, while it can be based from date of participation, it must be based on 415 comp (e.g. you could not use comp less deferrals, or comp less bonus, etc.),

while testing comp can be any of the definitions that satisfy 414(s) comp, which can also be from from date of entry.

I believe I've seen an example somewhere that for avg ben % test if someone entered 1/1 for deferral total comp was used for the deferral and mid year comp was used for the profit sharing and the sum of the 2 E-Bars was used, but maybe that was one of those 'pigments' of my imagination.

for rate group testing I would think you would still use comp from date of partic, not date of entry for deferrals.

otherwise a plan that provides a 5% contribution would fail testing because someone who enters midyear would appear to have only received a 2 1/2% contribution based on total comp.