Use top-hat NQDCP elective deferrals in 401(k) plan definition of comp

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I have always considered it a given that nonqualified elective deferrals can not be included in the definition of compensation for allocation purposes in a qualified plan. These deferrals would not technically be employee compensation. They would be employer contributions to the NQDCP on the employee's behalf.

Of course, a client has told me there is new legislation or case law that changes this result and allows nonqualified deferrals. I don't know of any such new law.

But it occurred to me to ask the following question: Does anyone permit the inclusion of NQDCP elective deferrals in the definition of compensation for allocation purposes, and then test for discrimination under the compensation ratio test? If the employee population is large enough, and the top hat group small enough, presumably you could have a small enough difference in the ratios to be de minimis.

Again, however, since these deferrals are employer contributions to the NQDCP, and not employee compensation, my understanding is that this is not permissible at all.

thanks.

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