Hours of Service

[Guest cafeaulait08]

Does severance pay generate hours of service in a DB plan?

[AndyH]

DB or DC is irrelevant to the question. What does the document say? Exactly what is the arrangement?

[Guest DBtech]

I don't think so. Isn't the employee terminated when he receives severance pay? You can check the DOL regs at http://www.dol.gov/dol/allcfr/ebsa/Title_2...2530.200b-2.htm

[Guest cafeaulait08]

Thanks for the help!

[AndyH]

I'm not sure that those regs say what hours are counted for service under a particular plan. They say what must be included and what things may be excluded, but unless the plan has an exact incorporation by reference then the regs may not provide the answer, although yes they will be helpful.

For example, the regs say that a plan need not count workers comp time as service time, but I was peripherally involved in a case where a state supreme court ruled that a plan must credit time while on workers comp because a plan did not have specific language excluding it, nor was a reference to it deemed specific enough. (yeah, I know, why did the state have jurisdiction?).

So the fact that such regs exist does not mean necessarily that they would answer this type of question which may depend to a certain extent on the language in the plan document.

[rcline46]

Also note that the IRS has recently issued a Notice/RR that specifically states severance pay does not count. SO if pay is not counted, hours would not be counted.

[JDuns]

The regs specifically state that an employee is entitled to credit for periods paid or entitled to pay but then limits the credit for periods when an employee is not working to 501 hours.

I think the notice/rr referenced is actually the clarification under the recently proposed 415 regs that indicate that only that portion of severance pay equal to regular wages for 2.5 months is compensation for purposes of 415 (which is the safe harbor compensation definition for 414).

A plan may clearly use a definition of comp that does not comply with 415 and credit service in excess of the Hrs of Service rules, but those definitions would need to be tested to ensure that they do not discriminate in favor of HCEs and testing service based on hours credited in excess of the rule are not counted.

That is why the initial answers started with "what does the document say".

[Kirk Maldonado]

rcline46:

Weren't those regulations issued by the IRS regarding the compensation that can and can't be taken into account for section 415 purposes?

Are you saying that those regulations would limit the amount of service credit that an employer could credit an employee with because of the receipt of severance pay?