ratherbereading Posted December 12, 2022 Share Posted December 12, 2022 DC Plan - employee terminated last month. To prevent her from suing the company (no details on that) they will be giving her $8,000 severance pay that will show on her W2. I don't think they give her the guaranteed 3% safe harbor on that amount because it was not given for services rendered and she would not have gotten it had she stayed with the company. True or not? The document discusses post-severance pay (bonus, commission, etc.) but not this. TYIA. 4 out of 3 people struggle with math Link to comment Share on other sites More sharing options...
Popular Post CuseFan Posted December 12, 2022 Popular Post Share Posted December 12, 2022 Post-severance compensation is different from severance pay. The employee would be entitled to the former if employment continued and its treatment for retirement contributions must be specified in the plan document. However, the employee is only entitled to the latter as a result of discontinued employment and such severance is NEVER considered plan compensation. ugueth, Luke Bailey, Bri and 2 others 5 Kenneth M. Prell, CEBS, ERPA Vice President, BPAS Actuarial & Pension Services kprell@bpas.com Link to comment Share on other sites More sharing options...
Peter Gulia Posted December 12, 2022 Share Posted December 12, 2022 What CuseFan explains is further supported by the § 415(c) rule about compensation. See 26 C.F.R. § 1.415(c)-2(e)(3)(iv) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR686e4ad80b3ad70/section-1.415(c)-2#p-1.415(c)-2(e)(3)(iv). Further, the distinction between compensation attributable to the former employee’s services before separation (even if paid after the separation) and compensation paid as severance pay is useful. To get the former employee’s releases and covenants not to sue, the separation agreement must provide the releasor something she was not otherwise entitled to. Luke Bailey 1 Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
Luke Bailey Posted December 20, 2022 Share Posted December 20, 2022 If possible, the should put "severance pay" in the memo line for the check, certainly not "bonus" or "special pay." Bill Presson 1 Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
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