Compensation does not include any amounts deferred by the employee pursuant to a Section 125 cafeteria plan.
Special rules apply to self-employed individuals, including partners in a partnership.
That is, the employee can make contributions with pre-tax dollars and can receive either a matching or nonelective contribution. The document must affirmatively exclude such employee by classification. An eligible employee may choose to make elective deferrals during the enrollment period and modify any previous election annually. An employee must be allowed to stop making contributions at any time. The plan may prohibit the resumption of contributions before the beginning of the next year for a participant who discontinues making elective contributions.