ADP/ACP Testing on wage definition different than plan operates?

[MD-Benefits Guy]

I am looking at a prototype plan adoption agreement that states for ADP/ACP purposes that all wages will be included, however matching calculations have several exclusions. Is it permissible to have a different definition of wages for testing purposes? If yes, is there something I can cite as a reference.

Specifically, the company does 401k matching only on regular earnings....however for testing purposes they have included Bonus, Commissions, and (this is the one that really throws me for a loop) stock related income (ESPP & Stock Option) that is reported on the w-2. Doesn't make sense.....Bonus & Comm I get, but why would you include stock related income (I know it's w-2 income, but it isnt possible to defer from this income)>

Thanks for the feedback Im certain to get.

[ETA Consulting LLC]

The only rule (barring something in the document that really isn't required) is that the plan must be tested with a non-discriminatory definition of Compensation. It does not have to be the definition actually used for the allocation. Not sure how that factors into what you are trying to do.

Good Luck!

[Tom Poje]

probably better to say that testing must be done on a definition of comp that satisfies 414(s), no matter what definition of comp is used for allocation purposes. see 1.401(k)-6 definitions : Compensation

many documents are general enough to simply state "use any comp for testing that satisfies 414(s)" rather than being specific, locked into one definition of compensation (like it sounds in your situation)