ADP Compensation

[Guest United pension]

We have a plan that has some question during an IRS regarding eligible compensation. The sceneriois this: An employee did not turn 21 until 05/25/2009 (of course plan requires you to be 21, 1000 hours and 1 year) And the entry date is 06/01/2009. The IRS is saying we need to use full year salary for ADP testing purposes. Practice has been that from January 1, 2009 Until May 25, 2009 (when he turned 21) it is considered INELIGIBLE compensation. Thus you would only use Compensation from 06/01/2009 to the end of the plan year 12/31/2009. I would love for some feed back on this.

[Lou S.]

What is the definition of compensation in the plan document, from date of entry or full year? And does your plan document address if the the same definition applies to allocation and testing under 414(s)?

For top-heavy 415© comp is full year even if allocation is from date of entry, but I've never heard the IRS requiring you use full year comp in testing unless that is written into your plan document.