Severance employer contributions?

[Guest JurisPrude]

Is it possible to also get contributions to an employee after he/she stops working?

I.e. as an early retirement incentive, ABC College gets employee to accept

early retirement and stop working Sept. 1, 2005.

The college tops up so the entire $42,000 limit for 2005 is used.

In addition another $42,000 is placed in January 2, 2006 and finally

another smaller amount [to make the total addition payments equal to the lesser of $100,000 or one year's salary] is made on January 2, 2007.

Did I see this on this board?

[Blinky the 3-eyed Fish]

One of the limits for a DC plan is 100% of pay. With pay of $0, she obviously cannot get any more contributions after the year in which she stops working.

[Guest Midas]

I can not determine from the question if there are other serverence payments being made other than the employer contributions. If the terminated employee is receiving severence payments, severence payments can be included for benefit accrual purposes.

Per ERISA Outlilne....

2. Treatment of severance payments for benefit accrual purposes. A question often

arises about the proper treatment of severance payments under the plan. Sometimes the plan document will specifically exclude or specifically include severance payments in determining an employee's allocation or benefit accrual. But sometimes the document is not so clear. Where the document is ambiguous, the plan administrator may need to interpret the document to determine what the

definition of compensation is for accrual purposes.

The thing to look out for is other requirements for contributions, such as hours or last day.