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School's contractual comp after plan year end

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I know this can't be a unique situation, but I've (luckily) never had to get involved in it before...

Small private school has a 6/30 plan year end for their 403(b) and profit sharing plans. The eligible teachers are under contracts that run from 7/1 - 6/30 (matching the plan year), but pay doesn't start until they start "work" ~9/1. The teachers have the option of taking their contractual pay over 10 months (9/1 - 6/30) or 12 months (9/1 - 8/31). The school has used this contracted compensation amount as compensation for the plan year all along, claiming that because they accrue the pay back to 6/30 for those who elect to receive it in July and August, this is OK.


I'm concerned about things like "constructive receipt" and timing of deferral deposits and when partcipants can make elections on their compensation. If we count this compensation in the previous plan year, do we just end up carrying the deferral deposits made in July and August as receivables? Can a participant elect to stop deferring on August 1?

This must all work out somehow, because I'm sure most schools do this kind of thing. Right?

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