I had an auditor call and ask if taxable income for group term life benefits is included in the deferral calculation and if not, how is it excluded in the document? He was at a recent seminar and the presenter scared everyone with an example where someone was wronged by this and missed out on a very small match ($2.00ish) and it cost a fortune to resolve. For this plan, we use 3401 compensation, no exclusions. We do include the fringe amount for the life insurance in the PS allocation. The client does not include in the deferral calculation. Their logic is that GTL income is not compensation paid to the participant, it is just taxed and not compensation included in the deferral calculation. For example, one person makes $50,000 and $30 in GTL annually. 10% deferral is $5000 not $5003.00. Does this make sense and does 3401 without exclusions support this? Thanks for any input

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