Match on Separate Bonus Deferral Election

[J. Bringhurst]

Client's plan uses W-2 definition of compensation and permits separate deferral election on bonuses.  Match is 100% of deferrals up to 3% of compensation and is payroll based; no year end true up.

If someone elects 10% deferral from regular paycheck but 0% deferral from separate bonus check is any match calculated with respect to the bonus amount?

Example: $10,000 salary check with 12% deferral and $1,000 bonus check with 0% deferral.  Deferral is $1,200.  Is match based on compensation of $10,000 ($300) or $11,000 ($330)?  Is the answer different depending on whether bonus check is paid on same day as salary check or on a different day? 

Thanks in advance.

[Bri]

I would probably review the plan document, just to shore up the wording of "payroll period" or "per paycheck" basis, how it exactly states that the match gets calculated. 

I could see an argument for either answer.  And then if it's still open-ended, the Plan Administrator has to make the call, and stick with it as it might affect each individual participant going forward.

[Tom Poje]

if the match was by payroll, I'd say it makes sense to include/exclude based on participants election.  otherwise,  unless there was something specific in the document, I would include it.

most of the documents I work with indicate a participant can make an election change anytime.

so I would view that as saying each payroll period I elect to defer, defer, defer..oh the bonus check I elect not to defer, and the I start up again.

otherwise, how do you handle something like only HCEs defer off the bonus and none of the NHCEs defer. I'd think if you don't include it then at the minimum you have to run a comp test because now you are treating it as 'excludable comp'...but I could be way off on my thinking there.

[david rigby]

Yeah, the familiar "what does the plan say?"

If the plan does not easily answer your question, perhaps it's time to amend it for clarity.

[CuseFan]

Yes, always refer to specific plan language, but I would view the bonus as a separate payroll because it allows for a separate election, and match accordingly.

[Luke Bailey]

J. Bringhurst, as you suspect, I think, there's a little that needs to be unpacked in the phrase, "payroll-based." If (as is probably the case), the bonus falls into some payroll period as defined in the plan for purposes of the match, then it's almost certainly going to have to be included for that payroll period in determining what 3% of the participant's W-2 compensation is for the payroll period.