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True "severance" pay is never Plan Compensation and is different from statutory post-severance compensation. If a person receives a "separation bonus" as part of their last paycheck, that may be includable depending on the terms of the plan - but if it's classified as severance it is ignored in any scenario. If this is includable post-severance compensation, and is not known until after the ASD, often a person is put into pay status based on the known (but incomplete) compensation amount and then after a final accurate benefit is calculated the future benefit payments are adjusted along with a true-up payment. Or, forms and elections are made using the aforementioned estimate prior to the ASD but then commencement is delayed for administrative reasons as the final actual benefit gets calculated and then paid effective back to the ASD. This is NOT an RASD if the QJSA forms are provided to the participant prior to the ASD. Plan language must specifically provide for an RASD and there are certain rules you must follow in calculating and communicating benefits.

True dat. Also, remember that many severance payments are made via payroll: in this case, the former employee is left on the payroll as a simple mechanism of making severance payments beyond the severance of employment date. This is mechanical in nature and does not define that person as an "active employee".

Hi Everyone, I have an update for you. I spoke to the Office of Regulations and Interpretations of the DOL. They model notice has the Paperwork Reduction Act because this information needs to be seen by the Plan Sponsor/ the Employer. However it does not need to be in place for the participants. The employer can remove if they choose.

The OP says "If you defer something other that 2,4,6...then match is 100% of deferrals." If literally true, that would mean if you defer 3% or 5% you get 100%. Is that true? If so, then I think you would have an issue of the match rate increasing when going from 3% to 4% (100% to 150%).

I agree that it could be done, but I would recommend against it. A better approach is to exclude all HCEs from the safe harbor, and rely on the plan's individual-groups allocation formula for nonelective employer contributions to make an allocation to some or all HCEs, if desired. This is a little bit more complicated (but only a little bit) and it gives the employer much greater flexibility.

At least some pre-approved documents provide for an "other" election for excluding participants from the Safe Harbor contribution, where they specify that it must be "an HCE, or" ............... so I don't see any prohibition about specifically naming an HCE as excluded. But I'll ask this - why? Given that documents can provide complete flexibility to exclude all HCE's, but make a "discretionary" Safe Harbor to "any or all" HCE's - what would be the point of limiting the flexibility by specifically naming one HCE?

If the document says that HCEs get the safe harbor then HCEs have to get the safe harbor. If they want to change that, it will need a plan amendment. Whether you can do that mid-year for the current year or whether it will have to wait to take effect until the next plan year is circumstance-specific. Did the safe harbor notice say that the employer may reduce or eliminate the contribution mid-year? Is the employer operating at an economic loss? Regardless, you can't eliminate benefits that have already been accrued. The anti-cutback rules protect both HCEs and non-HCEs alike.

You must follow the terms of the written plan. Look at the notes or other parameters around the safe harbor and see if the employer has any discretion there. If not, follow the written plan provisions, as a plan must comply in operation with those terms to retain its tax friendly (tax qualified) status. The plan may be amended prospectively to exclude HCEs from safe harbor, of course.