As the Plan Administration and reporting season begins January 1, it's very important that plan sponsors understand the definition of compensation in their legal plan document.
The Employees' contributions and or benefits of a plan are always based on the employee's compensation. It's not as easy as you may think! Compensation is not always just W-2 Compensation. The legal plan document may start with W-2 earnings, and then add or subtract certain types of compensation which are taxable to the employee. This may include reimbursements for travel, hotel, auto and entertainment etc. Insurance costs, etc. or other items.
It is a "Best Practice" for Plan sponsors to learn, and to review annually, and to know this definition so that compensation is reported properly, and contributions and benefits are properly calculated. If you need assistance please contact your service team member!