Compensation Definition Testing
Evaluate each pay code on the earnings listing against the plan's compensation definition and IRC §§415(c)(3) and 414(s), and return Eligible, Ineligible, or Manual Review Required per code.
Evaluates each pay code against the plan's compensation definition (and IRC §§415(c)(3), 414(s)) and returns Eligible, Ineligible, or Manual Review Required for each code.
Purpose
To evaluate each pay code on the client's payroll earnings listing against the plan's compensation definition and the relevant IRC sections, returning whether each pay code is plan-eligible, ineligible, or requires manual auditor review.
Procedures
- Obtain the payroll earnings listing showing each pay code and its gross dollar total for the plan year.
- Enter each pay code and a plain-language description in the sample.
- Evaluate each pay code against the Compensation Overview variable and IRC §§415(c)(3) and 414(s), returning Eligible, Ineligible, or Manual Review Required for each code.
- Document the eligibility conclusion for each pay code. For any Manual Review Required result, read the Compensation Overview, apply professional judgment, and record a final determination.
Engagement Variables
These are set by EBP Plan Analysis and referenced automatically when this procedure runs.
| Engagement Variable | What it provides this procedure |
|---|---|
| Compensation Overview | The plan's definition of eligible compensation, including which pay types are included and excluded. This is the primary policy basis Agentive uses to evaluate each pay code. |
Your selections
| Selection | What to enter | Why it matters |
|---|---|---|
| Pay Code | The exact pay code identifier as it appears on the payroll report (for example, REG, OT, BONUS, COMM). | Agentive uses this code to locate the matching row in the Payroll Report Earnings Listing and return the gross total for that pay type. |
| Pay Description | A plain-language description of what the pay code represents (for example, Regular hourly wages, Overtime premium, Discretionary bonus). | The description gives Agentive the context to evaluate economic substance over label. Vague or abbreviated descriptions produce less reliable eligibility determinations. |
Documents to provide
| Document | What it must contain |
|---|---|
| Payroll Report Earnings Listing | A payroll detail report that breaks out gross wage totals by individual pay code for the plan year. This is not the standard summary payroll register; you need the earnings detail or pay code breakdown report specifically. Each pay code must appear as its own row with the associated gross dollar total. If the payroll system produces a separate earnings analysis or pay type summary, that is the correct document. |
Don't have these exact documents?
Use Co-Audit to change which documents this request asks for, and to adjust the procedures and calculations that read them, so the workflow matches what your client actually provides.
Testing attributes
These attributes describe the outputs Agentive returns for each pay code rather than pass or fail agreements. Judgment-assisted result; auditor confirms before concluding.
| Output | Result | What to review |
|---|---|---|
| Eligible Compensation | Eligible / Ineligible / Manual Review Required | Agentive evaluates each pay code against the Compensation Overview variable and IRC §§415(c)(3) and 414(s), applying judgment to economic substance over label. Any result of Manual Review Required requires the auditor to document a conclusion, which is expected for discretionary or hybrid pay types. |
| Gross Wage | Dollar total for the pay code pulled from the earnings listing. | Confirm the amount ties to the payroll report. These totals feed directly into the plan-eligible compensation calculation. |
Update with Co-Audit
Real client data rarely matches a template exactly. When the earnings listing you receive, the pay codes on it, or a determination you reach during review differ from what this template assumes, use Co-Audit to retool the request. Describe what is different and it rewrites the document groups, AI Prompt Columns, and calculations to fit.
Situations where Co-Audit helps with Compensation Definition Testing:
- The client sent a summary payroll register instead of a pay-code earnings listing. Have Co-Audit rebuild the document request and extraction to pull gross totals per pay code from the report the client actually produces, such as an Earnings Analysis or Pay Code Summary.
- The payroll system uses non-standard pay-code labels (for example,
R-HRfor regular hourly). Have Co-Audit add a translation layer so each label maps to a plain-language description before the eligibility evaluation runs, which is what drives a reliable Eligible / Ineligible result. - A pay code keeps returning Manual Review Required and you have concluded how to treat it. Once you have made the call on a discretionary or hybrid pay type, have Co-Audit add a rule or note column so that code is classified consistently for every participant and the determination rolls forward next year.
- The client groups pay into categories rather than individual codes. Have Co-Audit update the workflow to evaluate each category and add a column listing the pay-code members of each.
Describe the difference in the Co-Audit panel
For example: "the client provides pay categories instead of individual pay codes; update the workflow to evaluate each category and add a column noting the category's pay-code members."
Let Co-Audit update the workflow
It revises the document groups, AI Prompt Columns, and calculations.
Review every change
Watch the columns for red text (a broken reference) and re-check any cell that involves math, where the AI tends to copy a number forward instead of recalculating.
For broader detail on tailoring requests and fixing broken column links, see Tailor a request with Co-Audit in the EBP hub. To preserve a hybrid pay-type determination so it rolls forward next year, record it in the Memo tab's Accounting Policies.
Continue your journey
← Eligibility Testing
Verify participant eligibility before evaluating compensation.
Payrate Testing →
Agree timecard hours to payroll and recalculate gross pay from the authorized rate.
How is this guide?
Eligibility Testing
Recalculate each participant's age and service at the beginning and end of the year, confirm proper plan entry, and agree employee and employer contributions from the payroll report to the plan census.
Payrate Testing
Agree timecard hours to the payroll register and recalculate gross pay from the authorized rate in the personnel file.