Contribution for Former Employees

[Guest t936]

As part of a complicated restructuring of our defined benefit, defined contribution, health and retiree medical plans, we would like to make a one-time nonelective contribution to former employees in the 401(k) plan. The contribution would either be a flat dollar amount to all former employees or proportional to account balances. Is a contribution of this nature permissible?

[Blinky the 3-eyed Fish]

Well one of the components of the 415 limit is 100% of pay. If they had no pay, then no way!

[david rigby]

Seems pretty fishy (no pun intended, Blinky). Why is this on the table?

[Guest t936]

A $500 monthly auxiliary benefit for participants who retire before age 62 was eliminated from a DB plan that was frozen but upon employee revolt we now are considering making a $6,000 annual contribution to a DC plan as an alternative.

[Alf]

You can still make 2004 contributions until your tax return due date, can't you? The contribution coudl be for 2004 or 2005 compensation, but not earlier.

[Locust]

You might consider an ad hoc increase to the retirees' benefits in the db plan that is based upon the $6000 amount - the actuary would calculate the increase for each employee - to the extent it was not discriminatory it might work.