Does anyone see a problem with the following definition of compensation, that will be in cash balnce plan.

The definition will apply only to the sole proprietor owner. Any other employees would of course have the normal definition of comp.

Definition of comp for owner only = Only compensation in excess of $100,000.

Interesting idea. As long as it is non-discriminatory I don't see why it would be a problem.

Couldn't you also use a traditional compensation definition, but create a benefit formula that only recognizes compensation in excess of 100K for the owner group. I'm assuming you are doing this as a way to only have an accrual if the sole prop. has a "good" year.

I think doing it through the benefit formula would be a little cleaner. I don't like to mess with the definition of compensation.

Thanks Effen,

Sounds like a better way.

Then wouldn't you only be able to consider $145,000 for benefit accrual purposes (i.e., the amount up to the $245,000 Section 401(a)(17) limitation that exceeds $100,000)?