How HRA Payments interact with 401(k) Contributions
Submitted by Anonymous on Mon, 2011-11-21 17:12.
Hi, Linda,
You also mentioned in the following post that HRA contribution on your W-2 increase company 401K match. Do you have any source of IRS documentation to support this? I'm talking to my TPA who thinks that the 401K contribution, DBP contribution are based on Social Security income, Box 5.
Thank you for clarification,
Kevin
Tres. Reg. Sec 1.415(c)-2(b)
There definitely does seems to be some confusion over this, but regulations states contributions are based on compensation included in gross income. That includes regular wages and fringe benefits. So yes, use Box 1 W-2 wages to calculate the employer contributions.
Hope this helps.
L:)
http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=898430ebca6ceee0a2fe113a5290fd66&r=SECTION&n=26y5.0.1.1.1.0.3.279
(b) Items includible as compensation. For purposes of applying the limitations of section 415, except as otherwise provided in this section, the term compensation means remuneration for services of the following types—
(1) The employee's wages, salaries, fees for professional services, and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the employer maintaining the plan, to the extent that the amounts are includible in gross income (or to the extent amounts would have been received and includible in gross income but for an election under section 125(a), 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k), or 457(b)). These amounts include, but are not limited to, commissions paid to salespersons, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, and reimbursements or other expense allowances under a nonaccountable plan as described in § 1.62-2(c).
(2) In the case of an employee who is an employee within the meaning of section 401(c)(1) and regulations promulgated under section 401(c)(1), the employee's earned income (as described in section 401(c)(2) and regulations promulgated under section 401(c)(2)), plus amounts deferred at the election of the employee that would be includible in gross income but for the rules of section 402(e)(3), 402(h)(1)(B), 402(k), or 457(b).
(3) Amounts described in section 104(a)(3), 105(a), or 105(h), but only to the extent that these amounts are includible in the gross income of the employee.