W2 wages of Auto Reimb Only and wants to defer

[KTB]

I have a participant whose only W2 wages for 2016 are going to be auto reimbursements but wants to defer into the 401(k) Plan. Since no 'paycheck' is actually issued or going to be issued, any idea how the logistics of deferring into the plan would work?

[PensionPro]

I don't think it is possible to defer from imputed income. If plan defines comp as W-2 you may have a problem since s/he is eligible to defer from W-2 comp but can not.

Your solution is (or would have been) to exclude fringe benefits from definition of comp for deferral purposes.

[hr for me]

Maybe a stupid question -- > Is the person actually eligible to participate in the plan? Are they truly an employee of the company? I am trying to figure out how you have an employee whose only W-2 income is an auto reimbursement? How else are they paying wages/commission? Or is he/she deferring 100% to a non-qualified compensation plan?

I also work on the payroll side and don't see how this could happen since the reimbursement usually is not an eligible wage code, but rather more like imputed income.

[KTB]

Participant is the owner of the business and isn't taking any actual wages for the year, so that is how that is working out. Thanks for the insight!

[hr for me]

Can they pay/take just enough income to defer almost 100% (minus what will be owed for employee part of FICA)? What % limit does the plan allow and will it affect nondiscrimination testing (or is it a safe harbor already)?