Deceased Employee, 457 Deferrals from Final Pay

[jsb]

Seeking guidance from the pros on deferrals from final pay of deceased employee. Plan is governmental 457 plan. Final pay may include earned wages and/or leave balance payout. In instant case, employee requested maximum deferrals from final pay. Beneficiaries are different for deferred comp account and final pay check, hence deferral from final pay is of great interest to both parties.

Final pay is a significant sum that would permit full year deferral, including catch-up contributions. Date of death was mid-January 2004.

How much deferral would you permit from final pay? Beyond the code definition of "compensation" eligible for deferral, is there any code cite, PLR, or other authority you can provide for permitting (or denying) deferral from final comp?

(Our Payroll Manager is requesting code authority for our current practice of permitting deferrals from final compensation in the case of deceased employees.)

Thanks in advance for the assistance and insights.

[Harwood]

Wages after death are paid to beneficiaries or estates, not to the deceased. Therefore, no deductions for deferrals.

See Publication 15 "Special Rules for Various Types of Services and Payments" and the Instructions for Form W-2.

NOTHING will go in Box 1 of the W-2; a 1099-MISC enters into the picture.