Employer Match and participant employment agreement

[whitboston]

An employee entered into an employment agreement with his employer.  It had a section regarding the 401(k) plan with the wording "any employer matching funds for the 401k plan would be deducted from the overall compensation.   For example if compensation equals $300,000 and he puts in $10,000 into the plan thereby triggering a $10,000 employer match, then his compensation would be adjusted to $290,000"

Can you do this?  The company has a 401(k) plan and this person is a W-2 employee.   Thanks.  

[401king]

I would have a hard time not calling that an Employee Elective Deferral. It's an election the employee makes, reducing his overall income. Just as a "Traditional" deferral would. 

...Maybe that part just shouldn't be in writing. 

[Bill Presson]

Employer contributions are considered as part of an employee's total compensation package all the time especially in medical practices. I can't comment on the specific language used in the agreement. It's possible that some attorney's know how to draft the agreement and some do not.

But if you have any non-owner physicians working for one of your clients, something like this is in their agreement.

[whitboston]

Thanks.   Does the wording have an impact on how much they contribute?  Would it be treated like an employee deferral?   Or can they deduct the full $18,000 and then get the full company match? 

[Bill Presson]

I'm not an atty so I cant really say.

Frankly, I don't see this as different from an Employer deciding what the profit sharing contribution is going to be each year in a cross tested plan with 1 group per person. The language is important.

[BG5150]

Would the OP lead to a deemed CODA and thus $20,000 in deferrals?

[whitboston]

Thanks.  Yes, that is what I am concerned about that it would be considered exceeding the 402g limit.   Maybe thinking too much about this, but the wording in the employment agreement makes me wonder.