Compensation

[MBCarey]

We have a construction company plan that normally has layoffs in the beginning of the year with most people being rehired mid year. We have two participants who became eligible for the plan 1/1/2008. Both were given paper work to enroll 1/1 but did not return that paperwork because they were layed off and nor recalled until March. Both signed enrollment paperwork for the 7/1 entry date. I beleive that compensation from 1/1 to 12/31 should be used for the ADP test not compensation from the date they enrolled.

For the same company, two employees also became eligible 1/1/2008, did not return paperwork, were layed off and eventually terminated as of March. Neither earned any compensatin in 2008 but were paid for their earned vacation and sick time. Should they be included in the testing for 2008.

Appreciate your thoughts on these two scenarios. I cannot find anything in the document that speaks about this.

[Kevin C]

For 1: Use compensation from 1/1 - 12/31 since they became participants on 1/1/08. You can exclude compensation before they become a participant. You can not exclude compensation while a participant, but before they enroll.

For 2: Look at the plan's final section 415 regulations amendment. There may not be a separate amendment for it. Our GUST document provider included the final 415 regulations provisions in their 2007 interim amendment. The final regs give you the option of counting as compensation vacation and sick pay received after termination of employment if it meets certain requirements. The amendment will say whether or not it counts as compensation.