Deferral percentage versus deferral dollars with regard to compensation

[Guest Angel(k)]

A plan sponsor provides it's employees the option of deferring a percentage of compensation or an actual dollar amount. The employer pays the employee bonuses, vacation pay, etc. on seperate checks outside of the normal pay period schedule. For the employees that chose a percentage of pay deferral the employer does deduct the percentage on every check generated regardless of the pay period schedule. For the employees that chose a dollar amount deferral the employer is only taking the dollar deduction on normal pay period compensation and is ignoring the additional checks that include additional pay(bonus, vacation, etc.). Is the employer required to take the dollar amount deferral on all compensation/checks regardless of whether it falls outside the normal pay period?

[Guest jhilliard]

What does the document state? The document will be your guiding light!

[MGB]

In addition to the document, I think this is a case where communication materials will come into play. What does the participant expect?

Otherwise, there is no law that says you must do it one way or the other. This is totally in the control of the design of the plan...but it must not be ambiguous leading to administrative discretion.

[TBob]

I agree with MGB here. I think a close reading of the deferral agreement/form signed by the participant might help as well.

The form could read..."deduct $$.$$ from my pay each month" in which case, not deducting from the bonus should be fine since the ER would probably have satisfied the $$.$$ from the regular paychecks that month.

If, on the other hand, the form read..."deduct $$.$$ from each paycheck" then I don't see how the employer can not deduct from the bonus checks absent something elso on the form that says exempts the bonus payments.

Of course, the plans definition of comp comes into play here as well as jhilliard pointed out.

[Harwood]

My Corbel adoption agreement - which only allows for deferrals as percentages - allows the Sponsor to allow Participants to "make a special salary election with respect to bonuses."