Using Different Comp numbers for Deferral and Match

[MWeddell]

Yes, they may use a different definition of compensation for the deferrals versus what they use for the match. They definitely won't fit a prototype plan document, but it doesn't sound like they do anyway. Obviously, you'd want to talk to payroll and the recordkeeper to make sure they can handle it.

Both the ADP and ACP tests should be run using 414(s) compensation. HCE compensation must be a total compensation definition. Hence, you probably want to include all commissions for running those tests.

If your client is already used to running their tests with deferrals limited to first $45000 of commissions, this change can be expected to make their ADP test results worse.

[Guest SPollock]

I am working with a client who wants to use different compensation amounts for 401(k) deferrals and match. The client presently uses a definition of comp as: salary plus upto $45,000 of commission. The client would like to allow the commissioned people to defer based on the salary plus all of their commissions (obviously capped at $170,000), but they would like to leave the definition of comp for the match at the salary plus $45,000 max of commissions. Can they use different comp numbers for the deferrals and the match? Could this affect discrimination testing? Also, if the salary plus commissions is greater than $80,000 are these people considered HCEs?

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[Alf]

Each rate of matching contribuiton is a benefit, right, or feature that must be tested under Code Section 401(a)(4). If the deferrals are based on different compensation amounts than the matching contributions, then wouldn't there be a potentially unlimited number of matching contribution rates to test? If there are any HCEs in the plan, this could be a problem.