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do you guys (or does anyone) know the IRS definition of compensation
versus taxable income or how compensation is defined within HCE?

Compensation used to determine HCE's is referred to as section 415 compensation and is defined specifically in the plan document (generally speaking there are 3 possible 415 definitions: current includidible, W-2, and Sect. 3401(a)). In addition, the general definition of section 415 compensation can be found in Treas. Reg. Section 1.415-2(d).

To answer your question "is moving allowances included in section 415 pay", the answer appears to be "possibly". As you'll see, there can be exceptions. I'll hit on each of the 3 types of 415 pay and how moving allowance might be treated under each.


If in checking your plan document you find that its' section 415 compensation definition is defined as "current includible compensation" per Treas. Reg. Sect. 1.415-2(d)(2), then the following types of income are included in determining your highly compensated status.
* overtime
* bonuses
* commissions
* tips
* fringe benefits ( e.g. taxable use of company vehicle)
* reimbursements or other expense allowances under a nonaccountable plan (as described in Treas Reg. Sect 1.62-2(c).
The reg. specifically mentions "moving expenses" as being included in the definition of this type of compensation. This assumes that the moving expenses/allowances are non-deductible.

IMPORTANT NOTE: There is a safe harbor rule discussed in Treas. Reg. Sect. 1.415-2(d)(10) that IF adopted by your employer's plan, specifically EXCLUDES moving expenses (among others) from the 415 definition of compensation. However the plan must specifically state that its' using the safe harbor rule for this to apply.

W-2 PAY or 3401(A) PAY

If the plan uses one of these definitions, it appears that moving allowance might be excludible in determining your 415 pay. Treas Reg. Sect. 31.3104(a)-4 suggests that payments made as a reimbursement or other expense allowance arrangement are EXCLUDIBLE if the amounts are treated as paid under an accountable plan (as defined in IRC Sect 62 and Reg. Sect 1.62-2.

Bottomline: If your plan uses the first 415 definition (includible income), your allowance is most likely includible (unless they've specified the safe harbor rule.) If your plan uses W-2 or 3401(a) definitions, than it appears that moving allowances could be excludible if paid under something called an "accountable plan". (sorry...I can't help you more on term "accountable plans" as I'm unfamiliar with that device.)

Now, so I don't get myself in trouble --> This information is supplied to you based on research I've done and is only meant as FYI. I am NOT an attorney and this information should not be construed as legal advice. If you have specific questions concerning your situation, you should consult your tax and/or legal advisor. The primary resource used to obtain this information: "The ERISA Outline Book", Vol. 1, by Sal Tripodi (1999/2000).

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