Elective Deferral Compensation

[DTH]

Some colleagues and I are having a lively debate about elective deferral compensation. Here is the scenario:

The payroll period runs from December 28, 2003 through January 10, 2004.

An individual makes $100 a day

The individual works Monday through Friday.

The individual is eligible to participate in the plan on January 1, 2004.

The individual signs and submits to the plan administrator the elective deferral agreement on January 5, 2004.

The individual made:

$300 through December 31, 2003

$300 from January 1 through January 5, 2004

$400 from January 6 through January 10, 2004

$1,000 total compensation for the pay period

What amount of compensation do the elective deferrals come from?

(a) $1,000 (pay period compensation)

(b) $700 (compensation from date of eligibility)

© $400 (compensation from date of signed and accepted elective deferral agreement)

Thanks!

[MWeddell]

(a), although the plan document could be more strict about the timing and require (b) or ©.

The entire $1,000 is available in cash to the employee after the later of when he or she becomes eligible and when the cash or deferred election was made.

[DTH]

Thanks. Could you provide me with a cite for this.

[MWeddell]

Treas. Reg. 1.401(k)-1(a)(3)(ii) and (iii).