8. Definition of earned income

Statement of Requirement: IRC 401(c)(2), 414(s); Treas. Reg. 1.414(s)-1(b)(3); Rev. Proc. 2023-37, 9.03(1)

Document Provision: _____

Sample Plan Language:

Earned income means the net earnings from self-employment in the trade or business with respect to which the plan is established, for which personal services of the individual are a material income-producing factor. Net earnings will be determined without regard to items not included in gross income and the deductions allocable to such items. Net earnings are reduced by contributions by the employer to a qualified plan to the extent deductible under IRC 404.

Net earnings shall be determined with regard to the deduction allowed to the taxpayer by IRC 164(f).

(Note to reviewer: This definition is not required if the plan is a Nonstandardized Plan that precludes participation by self-employed individuals.)