Salary Reduction Agreement and timing of implementation

[Guest kerryb]

A question's come up with regards to when a participant can file a Salary Reduction Agreement and when it can be implemented on the payroll system. Can a participant legally have a salary reduction agreement implemented in the same pay period it is signed? The example would be where the agreement is completed within a pay period and the participant expects that deduction to be taken on the paycheck for that pay period ... kosher or not?

Thanks,

Kerryb@waushosp.org

[KJohnson]

If I understand your question, as long as the participant is not in "constructive receipt" of the amounts from which he or she is deferring then it shold be o.k.

Roughly speaking under the Code, as long as you have a salary reduciton agreement in hand before "pay day" then he or she should be able to defer from that check.

Of course just because it is allowed under the Code doesn't mean your plan document allows it. You should check your Plan language on this issue.