I finally have a copy of our Plan document in house and have been trying to familiarize myself with it. I recently discovered that our payroll had not been taking contributions from bonuses and have set them straight on that. Since we have an extra payroll this month, I thought to check the Plan doc. again. I am trying to understand the plan language. Our definition of compensation is stated as following Code 6041 & 6051, income reportable on W2, with all pretax contributions added. Does this mean that they should be taking contrib. from the extra payroll? (we also have a p.o.p. cafe plan)Any help would be appreciated. Thank you.

Absolutely. Unless the "extra" payroll you are referring to is a "bonus" (think Christmas bonus) payroll, and somewhere in your plan it is stated that "bonuses" are not impacted by a deferral election.

Be careful. A definiton of compensation can be used for various purposes and you need to use the correct definiton depending on the purpose. A comprehensive definiton of compensation does not mean that you will allow deferrals from every source of compensation dollars. You can have plan terms that limit my total deferrals to 15% of compensation, but that does not necessarily mean that I get to defer 15 cents of each dollar that I would otherwise recieve. As usual it would be nice if plan documents had better terms that met these questions head on. Some do. Some do it by implication and you have to struggle with interpretation. Make sure you read plan terms carefully.