Allocation of 401K Contribution /Active Participation Rules

[Guest dancin]

We went to a 26 week payroll this year, so this is the first time we had a pay period that carried over from December to January. We made January contributions, both employee and matching, from the entire paycheck and allocated them all to 2008 (ie reported as y-t-d for 2008, not on 2007 W2), regardless of the year in which the services were attributable. Now wondering if this was right. Some employees had not reached 2007 limit yet, but highly compensated had, of course. Also had three employees terminate on the December side of the period, that we deferred income for from the January paycheck based on standard "last paycheck" practices, but now wondering if that shouldn't have been allocated to 2007 on that basis (in that case, one would have exceeded 2007 limits). We've looked at Notice 87-16 and are still not sure what it says to do here. Any advice?

[WDIK]

http://benefitslink.com/boards/index.php?showtopic=36271

http://benefitslink.com/boards/index.php?showtopic=38384

[Guest dancin]

Ok, thanks. Based on "pay date" controlling, then -- how does that apply to the 3 that separated last year? Are they actually eligible to participate/defer income in a taxable year that they weren't employed here? Plan defines eligible participant as employee. Also, if they were eligible on Jan. pay date, should we have also contributed for last year's bonus paid 4/1 of this year? We've always excluded anyone who separated in last year from participating on this one, although it falls in compensation definition. But if the january pay date makes them an active participant for 2008, why shouldn't they get this, too?