Employee contributions treated as Employer Contribs

[Guest CJA]

Other than employee elective deferrals which are treated as employer contributions to a 401(k) plan, can employee contributions that are not elective deferrals be deemed employer contributions under the 401(k) plan? For instance, if a 401(k) plan document allows taxable disability payments made to a claimant under LTD plan sponsored by the employer to be contributed to the 401(k) plan, can such employee contributions be treated as Employer contributions? Received an RFP recently that inquired as to wheher this type of plan design could be accomodated. Intuitively, this does not make sense to me. Any comments would be greattly appreciated.

[buckaroo]

I apologize, but I am not sure that I understand. Is the client stating the the taxable disability payments are considered eligible compensation to the employee and the employee can turn around and choose to defer the compensation into the 401(k) plan as deferrals? Or as an after-tax contribution? If not, aer you saying that the employer is permitted to take the payment and contribute them as a non-elective contribution to the plan for only that participant?

[Guest CJA]

Is the employer is permitted to take the employee contributions attributable to the disability payments and contribute them as a non-elective contribution to the plan for only that participant?

[buckaroo]

I am not sure that I can answer this but I will give a try. My short answer would be no for a variety of reasons including:

I would not think the 401(k) plan incudes the disability payments as compensation for plan purposes, but I would refer to the document. (Are the funds being paid via a w-2? Is it for work performed? Is the person actively employed?)

If the payments are considered income to the employee, you are talking about making them employer contributions and deferring them into the plan. I would think that the employee would have to agree to this and that would be considered a deemed coda.

How does the 401(k) plan allocate a non-elective contibution? If it is uniform, then I do not know how it would justify an allocation to one person.