415 limit Union Plan

[PFranckowiak]

Company has a 401(k) plan covering Union Employees

The Union Contract dictates the ER contribution by a set formula that $ per week.

Employee was on Disability for a month of the plan year and then terminated.

He had NO regular compensation - just workers comp.

Since he had no pay, the union contract said he gets the ER portion.

What about the 415 Limit - he has no pay and a contribution?

Pat

[Guest SloWorker]

The 415 limit is a flat $49,000 regardless of EE contributions.

[PFranckowiak]

What about the 100% of pay limit. If pay is zero -then wouldn't the limit be zero.

To complicate matters - the participant was paid out.

It was ER contribution money not 401(k) deferral

Pat

[Guest SloWorker]

Just to clarify, the employee at question participated in the plan for exactly one month. For that one month of participation, he received absolutely no regular compensation due to the fact that he was out on disability. After this one month of particiapation the employee terminated and received distribution of his funds?

[PFranckowiak]

Yes - noncalendar plan year EE has been in the plan for years, but this plan year only one month before he terminated.

EE was on workers compensation for that period and then he terminated.

Only pay was workers compensation for the plan year.

Union contract dictated he gets the contribution while on workers compensation

Never a problem when the EE has some pay during the year.

This employee had no pay and got paid out his distribution from the plan.

I think he exceeded the 415 limit and we need to try to get the excess deposited back into the plan.

Thoughts appreciated.

pat

[Guest SloWorker]

I just spoke to one of my co-workers about this. I was confused about how compensation would be defined if the participant was on disability. I got an answer! If the document permits employer contributions for disabled participants the employer would create a hypothetical compensation for said participant based on, in this case, what the participant would have made in previous months of compensation. Therefore, the participant would not be exceeding the 415 limits. A lot of documents don't allow for employer contributions to disabled participants after the end of the first plan year though, so I would suggest double checking the document for this provision first.