Compensation Definition

[Guest RetirementPlanWI]

Good Morning,

We have a plan that is setup to exlude bonuses as compensation. This was done because the employer pays a small bonus for each employee for Christmas and their birthday and doesn't want to withhold from that bonus.

We just found out that the employer has an incentive program where if an employee meets a financial goal each month, they receive two paid days off. Would this compensation be considered a bonus? If so, would that require a special deferral election?

Thanks

[austin3515]

It's not a bonus. It's paid time off.

[Guest Sieve]

In effect, as noted by austin, the "bonus" does not increase the employees' cash or non-cash compensation, so it is not additional compensation subject to a deferral election--until the value of unused days off is paid by the employer at the end of the year or upon termination of employment).

Even if it were included in income, you can't defer from additional compensation (or a bonus) that is not paid in cash unless it is included in income at the same time, and in the same pay period, with cash compensation?