Retroactive Wage Adjustment

[Guest TuckerB]

ER is making a retroactive wage adjustment to an EE's salary in that the EE's position was deemed to be of a higher salary grade. The retroactive wage adjustment is going back several years. Does the ER have an obligation to make an increased ER contribution to the EE's 401(k) plan based on the EE's adjusted salary for those years. The Plan document does not require the same?

[Jim Chad]

I am curious about what others will say so I want to bring this to the top with this idea.

If this extra comp is all being paid in December of 2009, than all of this comp is in what ever plan year includes December of 2009. And this is the plan year that any contributions would use this comp. This is my guess FWIW.

[david rigby]

Just a non-attorney guess: focus first on why the adjustment is being made.

If (for example) the retro adjustment is made due to court order or other regulatory authority, there is probably a written document describing it. A "make whole" intention may go beyond the pay itself and cover other forms of compensation. Different answers to the "why" question might lead to different results.

[Guest jims]

If the ER is paying the employee more money, I presume they are reporting it as current W2 income. Current income is likely subject to current 401(k) elections. That's what I've seen done in these situations. Mathematically, it may not generate the exact same result as if the extra money occurred in each of the prior years; but some people will conclude good enough.

[Kevin C]

What does the plan say? The Compensation definition should tell you how it is treated. In our documents, compensation counts when paid, but your document may be different.