Back Pay

[BTG]

When is back pay taken into account as compensation under a defined benefit plan (specifically a cash balance plan)? The plan defines comp as W-2 comp, which leads me to believe that the back pay would be taken into account in the year received (since it would be taxed in that year). On the other hand, the award of the back pay requires that the employee "be made whole in all respects." This would seem to suggest that the back pay should be taken into account when it would have been paid, but for the unlawful termination.

I know DOL Reg § 2530.200b-2©(3) requires hours of service attributable to back pay to be credited to the computation period(s) to which the back pay relates. However, I have not been able to find any similar guidance with respect to calculating compensation.

On a related note, if the award of back pay contains any offsets (e.g., income from other employment), can the plan take those into account when calculating comp? I would think it could since those offsets would be reflected on the W-2.

[Effen]

Its a document issue. If the def. of comp in the doc is W-2, and the "back pay" shows up on the W-2, it would be difficult to argue that it shouldn't be counted.

[david rigby]

... with a possible impact of 401(a)(17), which might be important.