401(k) contributions DURING military leave

[Guest HelpINeedSomeBody]

For tax reporting purposes, how would you report employee contributions to a 401(k) Plan for an employee who is on military leave but is receiving compensation from his employer to supplement his military pay to make it equal to what the employee received while actively working for the employer? Would you use a W-2 or a 1099?

[E as in ERISA]

The IRS' web site says that military differential pay is generally considered post-severance compensation and is reported on a 1099:

http://www.irs.gov/newsroom/article/0,,id=129833,00.html

I think that technically the position is that differential pay is not eligible for contributions. However, there was proposed legislation to fix that last year. Maybe this year too? And philosophically, I don't think that is the position. The proposed 415 regulations would allow that compensation to be counted as 415 compensation for qualified plan purposes:

http://benefitslink.com/taxregs/05-10268.pdf

Hopefully they will clarify the reporting of the contributions at some point on the combat zone web site....

[Guest HelpINeedSomeBody]

Outstanding response E...thank you!