Bonus paid after Dec. 31st

[Guest cascigm]

In a defined benefit plan, could a bonus paid after dec 31st 2000, be included in compensation for the year 2000?

[KIP KRAUS]

What kind of bonuses are paid in a defined benefit plan?

[david rigby]

A better question is "what is the plan's definition of compensation?" The plan will usually define the period (such as plan year or calendar year) and what comp is included (such as gross pay, base pay, etc.). The rule of thumb is "definitions rule".

[Guest cascigm]

To clarify, the definition of compensation includes bonus, my question is can you accrue this after year end. Plan yr = calendar year

[rcline46]

Assuming a w-2 employee, the answer is no, because the definition of pay (w-2, 415, or 3401) no longer includes any pay after year end. Even 1099 pay has to be done before year end. It probably would be counted in the next year if bonuses are included in the definition of compensation.

[Guest]

What am I missing? I can use any definition of compensation I want in my DB plan as long as the plan passes 401(a)(4) nondiscrimination testing and complies with section 415. Section 401(a)(4) may be a problem because you test for nondiscrimination by using W-2 compensation; but it may not be a problem depending on the terms of the plan. Section 415 could be a problem because it doesn't count accrued compensation.

I don't think there is a per se prohibition on using accrued compensation . . . you just have to run the various compliance tests and see where you come out.