Guest billy bong Posted November 16, 1999 Posted November 16, 1999 the ee is a former owner and retired 11/98. he is receiving deferred compensation in 1999. since he has not worked any hours, he should not be considered a participant. is this a correct assumption? their new tpa seems to think he should be included as a participant in 1999.
Guest mamato Posted November 22, 1999 Posted November 22, 1999 He should not be considered a participant. His deferred compensation is pay for hours he has already worked. No current hours of service equals no participation.
david rigby Posted November 22, 1999 Posted November 22, 1999 Be careful there. How is he being paid? If it is thru regular payroll for which he will receive a W2, having FICA tax withheld, etc., then that might imply that he has "hours worked". Anyone know if this is a problem or if I am being too concerned? I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
Earl Posted November 23, 1999 Posted November 23, 1999 I definitely think no service = no participation. The employer/employee relationship has been severed. Like a doctor receiving account recvble after leaving a group. CBW
Guest GregSelf Posted November 23, 1999 Posted November 23, 1999 Questions: 1. is the business unincorporated? 2. was/is this guy the sole owner? 3. if incorporated, is it an S-Corp, C-Corp, etc.??? 4. Is this "deferred compensation" actually his draw? Or is it being paid via standard payroll? Some other means? All these will have an effect on whether or not he's considered "benefiting". ------------------
Guest mo Posted November 23, 1999 Posted November 23, 1999 Here's a similar issue. I have a client who sponsors a profit sharing plan, and every year they contribute 15% of pay. Sometimes people terminate in late December, but because of the pay dates, they end up getting some comp at the beginning of January. The client has been making profit sharing contributions on behalf of these people (there are no conditions to receiving an allocation) for the year after the year of severance, because they have a minor amount of compensation albeit no hours. The plan language does not require any specific number of hours. Anyone see a problem with this?
Guest ptpnthr Posted November 24, 1999 Posted November 24, 1999 What does the plan document say? How does it define Participant? For which purposes does the TPA say they should be a participant? BNA says that compensation like this paid after termination is not eligible for 401(k) deferrals (I'm being very general here because I don't feel like spelling it all out). I think they are right.
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