Timing of 415 amendment

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Question 1

The final 415 regulation modify compensation that is used for code section 415 (which is also used for purposes of determining highly compensated employees and applying the top heavy provisions) and deferral compensation (so that a participant cannot defer out of post-severance compensation that is not 415 compensation).

Assume we amend a plan so that the plan’s 415 compensation definition is the same as the plan’s compensation definition (i.e. for allocation purposes).

Thus, the following would apply for allocation and deferral purposes:

The plan would include compensation paid the later of 2 ½ months after employment or the end of the year that includes the date of the termination for compensation for services performed during regular working hours, etc. and amounts paid for unused sick time, vacation, etc.

However, before the decision (January 10, 2008) was made to change the definition, as defined above, one participant terminates (January 5, 2008) and is paid his final paycheck (which included unused sick and vacation time) and no deferrals were withheld. The participant had an election on file and clearly would have wanted deferrals taken out.

Is this a problem?

Question 2

If the plan includes payments to a participant who is permanently and totally disabled under the 415 regulations, do the employer contributions have to be 100% vested.

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Is nobody responding because the answer is just to obvious?