Dougsbpc Posted February 8, 2019 Posted February 8, 2019 Running the ADP test for a traditional 401(k) plan based on compensation net of salary deferrals. A participant has compensation of $300,000 so she is being limited to $275,000. When we reduce her compensation for $18,500 of salary deferrals, is it subtracted from $300,000 or the $275,000 of limited compensation? Thanks.
C. B. Zeller Posted February 8, 2019 Posted February 8, 2019 You subtract out the deferrals before applying the 401(a)(17) limit. ugueth and Bill Presson 2 Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance. Corey B. Zeller, MSEA, CPC, QPA, QKA Preferred Pension Planning Corp.corey@pppc.co
Bri Posted February 8, 2019 Posted February 8, 2019 (And of course, if you're netting deferrals, you're netting ALL deferrals, including stuff like 125 plan amounts, if you want to remain a safe harbor comp. definition)
Luke Bailey Posted February 11, 2019 Posted February 11, 2019 Whoa, under 414(s)(2) your plan document can elect to not count all deferrals (401(k), 125, 132, etc.) as comp, as Bri points out, but most plans include all of it. You need to check your plan document. 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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