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Compensation Issue


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401(k) Safe Harbor ( 3% Non Elective)

Compensation is defined as W-2 wages - the only exclusion are fringe Benefits.

Participant has GTL wages -

The auditors agree  GTL is subject to salary deferral however, their position is this is a fringe benefit and not included in the 3% safe harbor.

In addition participant received Short Term Disability benefits - paid by the employer and included in W-2 wages

Again the auditor agrees this payment is subject to salary deferral, however, it could be deemed a fringe benefit and therefore not included in the safe harbor calculation.

Thoughts from the group? Are these wages really deemed fringe benefits and not subject to the 3%?  

Problem will be solved for 2025  for GTL will change to 3401(a) compensation. 


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52626, your question seems to be premised on a situation where the plan's provisions for what can be deferred and what is matched use different definitions of compensation. This would be unusual. Obviously, if it's the same definition, then they should be treated the same for deferral and match purposes.

Note that whether the imputed income from group term life premiums for coverage over $50k is an excluded "fringe benefit" or not (assuming the applicable definition of compensation excludes "fringe benefits"), there is no IRS or DOL rule, or general industry agreement, on what is a "fringe benefit." If there is no specific plan provision that defines "fringe benefit," you would need to look at consistent plan administrator interpretation of the term. The taxable portion of GTL premiums is generally comp for 415 purposes and would be included in a safe harbor comp definition.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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