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FPGuy, she can defer from pay that would have been paid had she left or stayed, provided the amount is paid by the end of the year following the termination, or within 2 1/2 months, if later.

Many documents have language that can help you out in such a situation. FIS, for example (my emphasis): "Regardless of the definition of Compensation selected in the Adoption Agreement, the Administrator may adopt a uniform policy for purposes of determining the amount of a Participant's Elective Deferrals of excluding "non-cash Compensation." For purposes of this Section, "non-cash Compensation" means tips, fringe benefits, and other items of Compensation not regularly paid in cash or cash equivalents, or for which the Employer does not or may not have the ability to withhold Elective Deferrals in cash for the purpose of transmitting the Elective Deferrals to the Plan pursuant to the Participant's Salary Deferral Agreement. Additionally, the Employer may, on a uniform and nondiscriminatory basis, permit different salary deferral elections for different items of Compensation (e.g., a separate salary deferral election for bonuses), and may exclude for purposes of calculating Elective Deferrals one or more items of irregular pay (e.g., car allowance)."

Your talking about this language I believe: (i) General rule. A defined contribution plan satisfies the safe harbor in this paragraph (b)(2) for a plan year if the plan allocates all amounts taken into account under paragraph (c)(2)(ii) of this section for the plan year under an allocation formula that allocates to each employee the same percentage of plan year compensation, the same dollar amount, or the same dollar amount for each uniform unit of service (not to exceed one week) performed by the employee during the plan year. Though I have never (EVER) seen such an allocation, I believe the intent is that a uniform dollar amount PER WEEK OF SERVICE) is what this anticipates. So, if you figure out the total of all the weeks of all the participants, and divide the allocation by that number of weeks, you then allocate to each person the result of that calculation times the number of their own weeks. You have eliminated any connection to compensation. Now, since in your plan you are first dividing them up by groups before doing this, I don't think you qualify under this safe harbor because you are first doing the group thing, which automatically throws you out of the safe harbor rules. While you may be able to do this, you are going to be subject to all the non-discrimination testing rules; this will not ever be a safe harbor (IMHO).

what 'should' happen - see page 20 (this is from the proposed regs, but this did not change in the final regs) Designated Roth Contributions as Excess Deferrals Even though designated Roth contributions are not excluded from income when contributed, they are treated as elective deferrals for purposes of section 402(g). Thus, to the extent total elective deferrals for the year exceed the section 402(g) limit for the year, the excess amount can be distributed by April 15th of the year following the year of the excess without adverse tax consequences. However, if such excess deferrals are not distributed by April 15th of the year following the year of the excess, these proposed regulations would provide that any distribution attributable to an excess deferral that is a designated Roth contribution is includible in gross income (with no exclusion from income for amounts attributable to basis under section 72) and is not eligible for rollover. These regulations would provide that if there are any excess deferrals that are designated Roth contributions that are not corrected prior to April 15th of the year following the excess, the first amounts distributed from the designated Roth account are treated as distributions of excess deferrals and earnings until the full amount of the those excess deferrals (and attributable earnings) are distributed. ............... in other words the excess 'needs' to be segregated (or tracked or something) from the Roth account in one of the plans. and since earnings are involved you would want it separate, I'm sure. since it was Roth, the person already paid taxes in 2017, and eventually when taking a distribution pays taxes again. otherwise, someone could defer 24,,000 into Roth into each plan. oh I have excess but I already paid taxes in 2017. now the excess continues to collect earnings, and if not removed from the Roth account then when the person retires he gets all that tax free. a great scam, works real well in a safe harbor plan in which there is no ADP testing! the problem, if it is in 2 plans separate plans, run by 2 different TPAs, how would anyone know? except for ethics on the part of the individual.... 402A_Proposed_Regulations_Roth.pdf