When an employee passes an entry date while out on workmen's compensat

[John A]

An employer has an employee who is out on workmen's comp, receiving 60% of their pay. The employee is going to be eligible to join the 401(k) on April 1st. Does the employee get to enter the plan on 4-1-00 or does the employee have to wait until being actively back to work. If the employee has to wait, does the employee have to wait until the next entry date or does the employee get to start deferring as soon as the employee goes back to work? If the employee can enter the plan while out on workmen's comp., how does the employer do deferrals since the employee is not getting a paycheck?

[Alf]

Of course, you'll need to carefully review the plan document for specifics, but the general rule is that the individual will be eligible upon return to employment. As for deferrals without pay, again, check the plan terms because they always have to be followed. The plan should provide that deferrals can only be elected from compensation paid by the employer. Also, there may be problems with the IRS if your plan permits participants to defer from amounts that aren't compensation from the employer.