Excluded compensation in Safe Harbor plan

[Penflyer]

Reviewing takeover plan docs from prior TPA.  Document is 3  % safe harbor with cross test language.  Definition of comp excludes bonuses.  Plan passes comp discrimination test but Safe harbor was calculated on comp less bonus.  I thought you had to use a 414s definition of comp for Safe Harbor.  Am I wrong?

[Bill Presson]

Excluding bonuses is considered reasonable within 414s if it doesn't by design discriminate in favor of HCEs. Passing the test shows that it doesn't. You're good to go.

 

Here's a link if you want. Compensation definition

[Mike Preston]

Are you guys sure you're talking about the same test?

[Penflyer]

I’m talking about the comp used for the safe harbor allocation only.

[Nate S]

On 3/31/2022 at 9:24 AM, Penflyer said:

I’m talking about the comp used for the safe harbor allocation only.

The takeover allocation was fine.  You are thinking of the 414(s) safe harbor exclusions (excluding fringe benefits for example) which don't need to be tested to prove non-discrimination.  Otherwise Bill has the right of it, any other exclusion that passes testing can be used for the allocation.