A client is a large company that has recently put some of its salespeople on a commission basis. Commissions are not included in the definition of compensation for purposes of the client's defined benefit plan.

One of the execs of the client who has worked in the insurance industry has said that at a former employer, salespeople who were paid on a commission basis were given "fictitious salaries" for purposes of the defined benefit plan. This exec also said that it is common practice in the insurance industry to do this.

I have never heard of this and am doubtful about how and whether such a thing could work.

Does anybody have any knowledge of "fictitious salaries" or any similar practice through which commissioned participants are deemed to have earned some sort of surrogate for commissions? For those of you who work with defined benefit plans in which some participants earn commissions, how do you handle the definition of compensation? Are all commissions included? Some commissions to a ceiling?

TIA

The plan document controls the definition of compensation and the subsequent benefits generated by the definition. I would strongly doubt that the industry practice (any industry) would be to ignore the plan document and generate fictitious compensation for purposes of benefits.

Everyone has a good story about something great that is/was done somewhere else and they use it as a reason to do something wrong in their plan. Usually the story turns out to be completely mistaken, At best, key details are missing.