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I have searched prior posts and cannot find a reference to this specific situation. Thanks in advance. An employee terminates on October 1, 2013. Terminated employee receives severance pay. Severance pay is not for services rendered, not for time off or sick leave, would not have been paid if the employee were still employed and not included in the 2 ½ month inclusion rules. Severance pay beyond this is not includible in the definition of compensation. The severance is paid from October 1, 2013 through March 1, 2014. The terminated employee defers and receives the match during this time period. Question: The match and the deferrals will need to be removed from the participants account. Do the 2013 ineligible deferrals need to be paid on a revised 2013 W2? Or can you pay out the deferral to the employee with a 2014 1099 or 2014 W2? How do you correct this? Thank you
