Retired participant with deferred comp income going into 401(k)

[Guest dietpepsi]

There is a retired employee receiving a W2 because she is receiving installment payments from a nonqualified deferred comp plan. It has come to the service provider's attention that she is being allowed to defer on this income and put it into the 401(k) plan. I've read that you can include deferred comp income in your definition of compensation but is there a rule anybody could quote me about only allowing "employees" to participate in the 401(k) plan, not terminated, retired former participants?

Thanks

[Harwood]

One has to be an employee to make deferrals. Reiterated by IRS representatives many times.

For example, try http://www.reish.com/practice_areas/Techni...ips/IRStip1.cfm

[Guest svatty]

or perhaps simply look at the 401(k) document ... the eligibility provision will probably say only "employees" are eligible to make deferrals ... the definition of employee should then make this retire deferal impermissible ... might want to check out the definition of compensation as well ....