Don’t exclude bonuses from definition of compensation

Maybe it’s the Larry David in me or the fact that I never had a job where I got a bonus, but excluding bonus from the definition of compensation is more trouble than it’s worth.

While I understand that plan sponsors may want to exclude bonuses from the definition of compensation because they don’t want to offer employer contributions on the bonus, I just think it’s just a pain. Why? Excluding bonuses would take the compensation definition outisde of safe harbor Section 414(s) compensation, which would require testing to determine whether the definition discriminates in favor of highly compensated employees.

While most testing I’ve seen for compensation has passed, I just think excluding bonuises involved more work and just not worth it, to save a few dollars.

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