---
title: "Determining Retirement Plan Compensation"
date: 2015-12-07
author: "Site Admin"
featured_image: "https://pinnacle-plan.com/wp-content/uploads/2015/12/Compensation-Icon.avif"
categories:
  - name: "Newsletters"
    url: "/category/newsletters.md"
  - name: "Uncategorized"
    url: "/category/uncategorized.md"
---

# Determining Retirement Plan Compensation

[![Retirement Plan Compensation](http://pinnacle-plan.com/wp-content/uploads/2015/12/Compensation-Icon.png)](http://pinnacle-plan.com/wp-content/uploads/2015/12/Compensation-Icon.png)View This Newsletter: [Determining Retirement Plan Compensation](http://pinnacle-plan.com/wp-content/uploads/2015/12/2015-Benefit-Insights-December.pdf)

Overview:

This newsletter explains the intricacies involved with determining retirement plan compensation.

- Determining Retirement Plan Compensation 
    - Compensation used for: 
        - Calculating contributions
        - Applying limits
        - Conducting non-discrimination testing
        - Determining tax deductions
- Overview 
    - Four General Definitions 
        - W-2 compensation;
        - Withholding wages;
        - Current includible compensation; and
        - Simplified compensation
    - Compensation ratio test
- Pre-Participation Compensation 
    - This pay is usually included, but may be excluded if noted in the plan document
- Bonuses, Commissions and Overtime 
    - The default under the four definitions is that all of these are included unless otherwise noted in the plan document
- Taxable Fringe Benefits 
    - A plan can exclude taxable fringe benefits from its compensation definition
- Reimbursements and Allowances 
    - Distinction between the two
    - Reimbursements are not included as plan compensation, while allowances are included.
- Post-Severance Compensation 
    - Four categories: 
        - Amounts earned but not yet paid at time of termination;
        - Payments for unused leave;
        - Distributions from deferred compensation plans; and
        - Traditional severance pay.
- Self-Employed Individuals 
    - Earned income
- Employees vs. Independent Contractors 
    - Distinction between the two
- Conclusion 
    - Determining compensation can be quite complicated.
- IRS and Social Security Annual Limits 
    - The 2015 limits will remain unchanged for 2016 because the increase in the cost-of-living index did not meet the statutory thresholds that trigger their adjustment.

## Contact Us

 

CommentsThis field is for validation purposes and should be left unchanged.













Name(Required)  First    Last  

Company



Email(Required) 



Phone



Message(Required)







 Submit             

  

Pinnacle Plan Design is a third-party administrator (TPA) for employer-sponsored qualified retirement plans. We specialize in retirement plan design, administration and actuarial consulting for 401(k)/profit-sharing plans, defined benefit plans, cash balance plans, and 403(b) plans. Pinnacle Plan Design proudly serves businesses nationwide.