definition of comp for safe harbor match

[cpc0506]

Can one use gross compensation for Salary deferral purposes and a different defintion of compensation that excludes overtime and bonuses and commissions as the basis for the safe harbor match?

[Tom Poje]

well, the comp definition for deferrals only has to 'reasonable'

but the match has to satisfy 414(s), so the plan could exclude bonus/commissions if you pass the comp test.

but if you fail then what? you can't test the plan on a defintion that satisfies 414s because there is no test.

so from what I read you are now stuck with a corrective amnedment.

and if you fail one year, just what do you think will happen in the future.

[12AX7]

Tom, isn't there the possibility of having different rates of match in this example? I would perhaps feel more comfortable if the same exclusions applied for deferral and match. I thought there were examples of this in Sal's book. Your thoughts?

[Tom Poje]

Looked it up - chapter 11 part I.3c

Sal talks about a situation that excludes a number of things for purposes of deferral (e.g. bonuses) but then that the match must satisfy 414s

somewhat the opposite of what is described here the example provided in 3.c.1 says as long as plan must pass compensation ratio percent test for the match no matter what the deferral comp def is.

You raise a valid point in regard to rate of match, but my understanding of the rate of match issue is that you can't provide a larger match % on 'more' deferral (e.g. 100% on the first 3% and then 150% on more than 3%, which wouldn't happen in this example.

that being said, I personally wouldn't write a formula like that

Sal has a big write up 11.B.5 in which, at least in my opinion, the Reader's Digest condensed Version would be: "What are you, out of your mind?"

[LANDO]

What about a non-safe harbor match. My understanding is that a non-safe harbor match does NOT have to be allocated on a 414(s) safe harbor def. i.e. match only needs to be based upon a "reasonable" definition of comp. Thoughts?

[K2retire]

Sal has a big write up 11.B.5 in which, at least in my opinion, the Reader's Digest condensed Version would be: "What are you, out of your mind?"

Isn't that exactly what we'd all like to say to clients from time to time?