Retired participant with future receivables

[Guest Sbart62]

I have a fical year (September 2006) Safe Harbor 401-K. One of the participants (a physician) is going to retire in August 2006. The corporation is going to be paying money due to him (receivables) sometime after he retires.

If the corporation pays him a portion of his receivables anytime during Oct-Dec of this year, can he then defer this into the 06-07 plan year? His hope is to keep delaying these payments so he can contribute them to the 401-K for the next few years. It doesn't feel right to me but I thought I'd run it by the board.

Any thoughts would be appreciated.

Scott

[JanetM]

What does the plan consider eligible comp? If he retires in August how can he be eligible for plan?

[Guest Sbart62]

JanetM,

Thanks for the response. The plan in question uses the 3401(a) definition of compensation which leads me to believe that the "Receivables" would qualify as eligible compensation.

Another possibility is that the participant, instead of retiring, stays on in a small administrative capacity working a few hours a week. If this is the case and the corporation (in Oct-Dec) pays some of the "Receivables", could he then defer them for the 06-07 plan year? If this is possible, could he not do the same thing in subsequent plan years until the "Receivables" are exhausted?

Thanks again.

Scott

[Guest mjb]

As long as he is an active employee he can receive comp. regardless of # hours worked. Why should he retire? What is the defintion of a particpant?

[JanetM]

Sbart62, if he stays on part time basis while they pay him out his "receivables" then he is an employee and eligible to defer. Are they paying these receivables on W-2? If so there should be no question, he can defer.