Post Severance Compensation

[PFranckowiak]

Post Severance Compensation

Calendar year plan

Participant terminated at end of year Dec 2007.

Paid in 2008 for hours worked in 2007.

Last check and separate check for bonus.

What year does the pay go into for contribution purposes?????????????????????

415 amendments counts compensation after DOT. (adopted 2/4/2009, effective 7/1/2007.

Has to work 1 hour to get contribution per plan document - MPP.

Participant in mpp and psp calendar year plans

Since DOT is 2007, our software system excludes from testing.

1. Should participant have been given the contribution on the bonus/ and or last paycheck paid in January 2008?

2. Should the participant be included in all the testing for ADP/ACP 415, 404, 410(b) 402 (g) etc for 2008?

3. Is compensation 2007 or 2008 compensation?.

4. What about hours worked – any for 2008?

5. If MPP has one hour of service requirement for the MPP should they get the MPP contribution for 2008?

Thanks

Pat

[Tom Poje]

I suppose it depends on how the document is worded (but then many documents do not describe things accurately enough)

for example, the new Corbel documents have an option "Administrative delay ("the first few weeks") rule.

415 comp for a limiation year shall not include, unless otherwise elected in section XXX of this amendment, amounts earned but not paid during the limitation year solely because of the timing of pay periods and pay dates.........if elected, ...shall include ...provided the amounts are paid in the first few weeks...

suppose the ee deferred. He would have a W-2 indicating during in 2008 even though he terminated late 2007, simply because of the timing. My own personal opinion is that for a given calendar plan year, you are not using calendar year comp, but rather payroll comp that falls withing that plan year. so (unless the document specifically says include the comp in the prior year) I treat the person who terminated 12/27/07 as having terminated '1/3/08' [or whatever the last payroll period was] lets take it one step further. suppose that person had deferred 15,500 in 2007 before the last paycheck. do you now say he has excess deferrals???

but then that is only an opinion.

[PFranckowiak]

Thanks Tom

Okay - so he has compensation in 2008, I tend to agree with that.

But the document says he has to have 1 hour of service to get a Money Purchase Contribution.

Do we consider the hours from the last payperiod and he gets the contribution? (This is what I want to happen)

Now to make matters more complicated - what about only a bonus that was paid - same issue, but the bonus when we get the payroll does not have hours?

Participant is a HCE (Dr.) Need I say more.........

Pat

[Tom Poje]

my line of reasoning would work something like this:

plan year 1/1/2008 - 12/31/2008

first paycheck runs from 12/27/07 - 1/2/08. ee defers $30 and works 40 hours.

I doubt very few people say, oh he worked 5 days in 2007, so I will count $30/5 for ADP credited in 2007 and $30/2 for ADP credited in 2008. and therefore I count 40/5 for hours in 2007 and 40/2 for hours in 2008. Rather I look at the year as a whole and use the whole payroll running from 12/27/07 - 12/25/08 and therefore the hours credited during that payroll period. The document generally says use W-2 comp and that would be what was on the W-2 statement, so why would hours be any different. but then, thats my opinion only.