Deferrals from paycheck after retirement

[Guest getaxa]

I have an employer (public school) who will not, with out documentation, take 403(B) salary reductions from the final pay check of an employee. Their claim is that since the person is not employed anymore than they can not contribute. My understanding is that contributions must be made in a "reasonable time." The situation is this: A teacher is retiring June 1, 2002. Their next (and Last) pay check she is going to get is around June 30, 2002 for her services performed before her retirement. She wants to defer from that pay check. The school payroll will not take deferrals out because she is not employed anymore. Does anyone know where I can get something to show there people? Thanks for any info!

[mbozek]

I have never head of an employer refusing to deposit salary reduction contributions made after the employee terminates employment because no one has ever considered it to be illlegal. Reg. 1.403(B)-1(B)(3) requires that a salary reduction agreement be in effect in order for amounts earned to be excluded from income. Salary is considered earned when the services are perfomed even though payment is deferred until a later date. GCM 39659 ( 9-8-87). Under Rev. rul 67-69 an employer can defer making contributions as infrequently as once a year.