We know that the 100% of avg. compensation is based on the high aggregate three years of compensation, and less than three years of compensation if the employee does not yet have three years of compensation.

What if in the first year of participation the employee earns $30,000. We are assuming the employee has 10 years of service prior to plan implementation and only compensation while a participant is being used for 415 and plan purposes.

Is the 100% avg comp limit $30,000/1 or 10,000 (30,000/3) after the first year of service?

And in a different eg. an employee earns the following compensation:
Year 1 = 500,000
Year 2 = 50,000
Year 3 = 50,000
Assume 401(a)(17) is limited to 210,000.

Is the 100% comp limit equal to $200,000 (500 + 50 + 50)/3 or is it 103,333 (210+50+50)/3.

For plan benefit purposes the 3-year avg is 103,333, but in this case the plan could have a formula of 150% of avg comp and still be below the 415 limit of 100% comp. I've seen both interpretations supported.

Thanks.

1. $30,000 or you could dig up the past 10 years' comps and compute the 3 yr average based on all available comps.

2. $200k. However, under the recently proposed regs, if made final as they are, it would be $103,333 - but they are far from being final!

The above are accrued averages. For funding purposes, you could use the 3 year average of past and future comps. For example, if in example 2 you assume that the participant will continue to earn $500k each year until retirement, then your projected averages would be:
S415 - $500k; S401(a)(17) - $210k.