Post Severance Compensation

[Gilmore]

A participant in a calendar year plan terminates on 12/31/2007. Their final paycheck is paid on 1/15/2008 and includes only pay for hours worked in final pay period. The compensation will be shown on the participant's 2008 W-2. (The compensation was not used as part of the 2007 plan compensation.)

Should this participant be included in the 2008 ADP test since they had plan compensation paid in 2008? Or are they not included in the 2008 ADP test since they are not actually an employee in 2008?

Thanks.

[rcline46]

Using the 'first few weeks' rule in the old and new 415 regs, put the comp and deferrals into 2007 and be happy.

[david rigby]

IRS Reg. 1.415©-2(e). You can read about that beginning on page 41 of this document:

http://a257.g.akamaitech.net/7/257/2422/01...pdf/E7-5750.pdf

Note the phrase "...the plan may provide..."

[Blinky the 3-eyed Fish]

Remember though that the 415 Regs. don't apply until limitation years beginning after 7/1/07

[Gilmore]

Right, Blinky, and because the new regs did not apply the plan administrator did not take any deferrals out of the last paycheck.

Therefore using the de minimis timing rule would require a rerun of the 2007 ADP test, since the participants ADP would now be lower.