Non-Governmental 457(b) Compensation

A non-governmental 457(b) Adoption Agreement defines compensation as "Base Salary".  A participant elected to have 5% of pay deducted and contributed to the plan in 2021.  The plan sponsor paid a "COVID-19 Bonus" in 2021, withheld 5% from that bonus, and contributed it to the 457(b) Plan.

The participant is fine with the 5% withholding so would a plan amendment to the definition of compensation to include bonuses suffice?  Neither the plan sponsor nor the participant is interested in finding a way to remove the funds from the account that has been established.  We're only talking about a $100 contribution so nobody wants to spend too much time on it, but I want them to do whatever is needed and to do it properly.

If the bonus is just reinstating pre-pandemic pay level after cut, I would argue it is base pay. If everyone got the same 5%, probably also argue it's base pay and within employer's administrative authority to interpret plan as saying base pay. Since the year is not over, you could adopt a discretionary amendment on or before 12/31/2021 if you are unsure.

Thank you Luke Bailey. The plan sponsor wasn't specific about the methodology used in providing the COVID-19 Bonus so I think the amendment will be the way to go.

Does the employer contributions show up anywhere that they are paying the CEO.  I have a client that does not want it to show up on the 990 or anywhere else that the agency is putting the money away for him.

Form 990 Part VII (Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors) includes deferred compensation. For an amount not yet paid, other compensation includes amounts accrued under a deferred compensation plan. “Deferred compensation to be reported in column (F) includes compensation that is earned or accrued in one year and deferred to a future year, whether or not funded, vested, qualified or nonqualified, or subject to a substantial risk of forfeiture.”

https://www.irs.gov/pub/irs-pdf/i990.pdf

Further, the organization’s accrual-basis financial statements will, somehow, show the deferred compensation obligation.

"I have a client that does not want it to show up on the 990 or anywhere else that the agency is putting the money away for him."

This does not sound good.  At all. Who is speaking in this manner for the employer/agency?