Is it true or false that 415 compensation must be used for allocating employer contributions?

The statement is false because 415 compensation is not universally required for allocating employer contributions in all plans. While it is important to understand that 415 compensation is used for certain purposes—specifically to determine limits on contributions and benefits under Section 415 of the Internal Revenue Code—it is not mandated for the allocation of employer contributions in every qualified retirement plan.

Each plan can specify its own definition of compensation for contribution allocation, and many employers may choose to use a different definition of compensation that better aligns with their payroll practices or employee compensation structures. As a result, while 415 compensation may be relevant for certain calculations, it does not apply in every case when allocating employer contributions. This flexibility allows plans to adopt various compensation definitions based on their specific goals and requirements.