prior year terminated participants

[Chippy]

A participant terminates on 12/31/2008. His final paycheck is paid in 2009. Is that employee included on the 2009 ADP/ACP test? No last day rule for match. Would they also receive a SHNEC on that compensation?

[rcline46]

Read your FInal 415 amendment for the answer to your question. It is spelled out in that amendment exactly what happens.

[Tom Poje]

comp is still comp for plan purposes (unless it falls into that category of severance pay), so is eligible for safe harbor.

whether you treat that amount in 2008 or 2009 depends on the document as Mr Cline indicated.

I am a bit confused as to the statement "Is it included in the ADP/ACP test" and "Are they eligible for the SHNEC".

if its a SHNEC then there shouldn't be an ADP test.

[Chippy]

This particular plan does not have a SHNEC. I was just asking in general. So even though the participant terminated in a prior year, he has 415 compensation paid in 2009 which would have been eligible for deferral and should be included in the adp test? Correct?

[Tom Poje]

yes, assuming he was a participant.

look at it this way. suppose the person quit 12/2709

he had been deferring 10%, his last check was $1000 and shows up in 2010

I'd assume that 100 shows up as deferrals. note that the w-2 would be for 2010, so usually (unless the plan document specifies otherwise) you count that in 2010.

now, someone else is in the same position, but didn't defer. It wouldn't make sense to treat the 2 people differently.

when the final regs came out the goal was to make sure such situations were speciifically outlined in the document.