A. A plan using a safe harbor definition of IRC §414(s) compensation for nondiscrimination testing need not perform the compensation ratio test.

B. A plan using a nonsafe harbor definition of IRC §414(s) compensation for nondiscrimination testing must apply such definition consistently for all participants.

C. A plan may meet the safe harbor definition of IRC §414(s) compensation by including 401(k) elective deferrals and excluding 125 plan elective deferrals.

D. A plan may use a 12-month period other than the plan year for purposes of determining IRC §414(s) compensation.

E. A plan may use a rate-of-pay definition of compensation for IRC §414(s) purposes.

A. 20 percent of regular compensation

B. Bonuses

C. Overtime

D. Expense allowances

E. Fringe benefits

A. $58,000

B. $59,500

C. $62,500

D. $66,500

E. $69,500

A. In the case of a short taxable year, the deduction limit for a defined contribution plan is applied to aggregate participant compensation paid for the short period.

B. A short taxable year results in a prorated compensation dollar limit under IRC §401(a)(17).

C. A short plan year does not directly affect the defined contribution deduction limit because that deduction limit is based on participant compensation for the employer’s taxable year.

D. Compensation for deduction purposes is measured on the basis of the employer’s taxable year, whereas compensation for IRC §415 purposes is measured on the basis of the limitation year.

E. The definition of compensation used for allocation purposes must be the same as the definition of compensation used for deduction purposes.