Compensation definition question

[Guest jc1457]

Hi,

We have an ERISA 403(b) plan which uses 415 comp for calculating the employer contribution. The client would like to exclude Vacation pay, sick pay and back pay from the definition of compensation. Is this allowable if we test the compensation to ensure that it is not discriminatory?

I thought that you could not exclude compensation that was paid on a consistent basis and so all of the 3 mentioned above cannot be excluded. However, I'm having a hard time finding support for this.

Thank you!

[Kevin C]

I don't think the definition of compensation they want to use would be considered reasonable under 1.414(s)-1(d)(2). But, you are not required to use a 414(s) compliant definition of compensation to allocate the employer contributions [see 1.414(s)-1(a)(2)]. You can allocate based on it, but your testing would have to use a different, 414(s) compliant compensation definition.