Participant Terminated with Sev-pay...

[K-t-F]

What happens when a participant is terminated and receives Severance pay for over a year.... The plan administrator withheld deferrals from his Sev-pay for all that time and then all of a sudden he receives a check from the plan stating that it was all done in error, here is your $ back. It sounds like the guy slipped through the cracks, but what are his rights? He has lost out on over a year of deferrals saving for his retirement.

Thanks

[mbozek]

I dont understand your Q. The plan can only provide benefits that are permitted under the plan document. If the deferrals were accepted in error then the plan's only option is to return the deferrals to the participant.

[GBurns]

I don't understand the problem. He missed making the additional deferral because he got the money back doesn't seem to be a problem.

If the money was deducted pre-tax and he got his deferral back, he might even be better off. He might have netted more. He can now use that money to put anyhwere he wants for his retirement.

Nothing says that retirement savings can and must only be done through a 401(k).

He can start his own non taxable plan. Or he might set up an IRA for 2005 since even if he starts a new job he might not be eligible for a while to participate in the plan of the new employer. If he is rolling over his 401(k) rather than leaving his money in the employer plan, he might be able to add this extra money on an after tax basis.

[K-t-F]

I understand that the plan can not accept deferrals if the document does not allow it... you need to run the plan based on the doc.

The participant did receive the deferrals back with earnings, but 2 years later. GBurns.... are you saying the return of his deferrals can simply be rolled into an IRA, considered a rollover rather than a contribution?