SERP and Retirement

[Guest gordonhs]

I am having a problem researching my current situation. (Background) I worked for a company that has a retirement plan and is based on number of years worked and the retirement payout is based on a formula that uses your last 12 months of compensation. I also had available to me a SERP plan, which is a non-qualified plan. During my last 3 years of employment I contributed to the SERP on a monthly basis and also deposited bonus awards that I received for departmental performance.

My situation is as follows: In 1999 I was diagnosed with Multiple Sclerosis and shortly there after had to go on permanent disability. A couple months later I was forced to take distribution of my SERP savings, which were taxed as ordinary income. I am now getting ready to turn 65 and have recently inquired about my retirement benefits. All the compensation numbers that the company had supplied me with in the past included my regular salary and bonuses when calculating the last 12 months of companion for retirement purposes. Now all of a sudden the company says - that they have made a mistake and by ERISA ruling they cannot included my bonuses as compensation because I deposited them in my SERP which is a non-qualified plan, and the fact that I had to take mandatory distribution because of my Multiple Sclerosis did not matter.

My question is - The VP of the HR department referred me to the following IRS definition of "compensation"

which he is using to disqualify my bonuses as compensation in my retirement benefit calculation, they are "Code Sections 414 and 415. I have looked for several days and have had absolutely no success in finding these sections, has anyone out there had a similar experience or is familiar with these two sections?

Any help or a point in the right direction would be appreciated.

Thanks in advance,

[Harwood]

Benefitslink has links to some sections of the Internal Revenue Code.

http://benefitsattorney.com/cgibin/framed/...?ID=304&id==304

[Harwood]

You should get a copy of any plan documents, as well as details about the "ERISA ruling."

[TCWalker]

Yes, those Code Sections exist. IRC Section 414(s) deals with alternative definitions of compensation for qualified plan purposes. I think members of this forum are relunctant to reply to your post because the facts you outline suggest you should be receiving guidance from a competent advisor or legal counsel - not from a bulletin board. Obviously, this is an important matter for you and involves the application of complex tax rules. I encourage you to find qualified pension consultant or ERISA attorney who can perform the necessary fact finding and work the problem through with you - that's "the right direction". Best wishes.

[david rigby]

You might find some assistance here: http://www.actuary.org/palprogram.htm