A key issue in an IRS audit and related internal Form 5500, Annual Return/Report of Employee Benefit Plan, auditor review is to ensure that the various definitions of compensation under a tax-qualified retirement plan (a ‘‘plan’’) are being properly implemented. This article provides background on this issue and discusses various definitions of compensation, the potential consequences of the mistreatment of compensation definitions, and related considerations that are important to maintain the tax qualified status of a plan.

Originally published in Tax Management Compensation Planning Journal.