Death of Participant and 401k Contribution

[Dazednconfused]

Hi,

A participant dies, she had vacation time and personal time due and the employer does not want to withhold 401 deferral contributions on the final check for her vacation & PT, is this allowable? The plan does not exclude any type of compensation and I haven't found anything that seems to nullify her election form upon death.

Thanks for the help.

[GMK]

I think you got it right. The death of a participant doesn't change the definition of compensation unless the Plan Document says it does, and deferral elections live on unless the Plan Doc says they do not.

(What is the employer trying to do, save a little match money? Shees.)

[Dazednconfused]

Hi,

Not even saving match, this plan doesn't waive allocaiton conditions upon death, so not sure why they are fighting this but for some reason they don't want to withhold her deferrals on the final check...I think the elections are in force as well.

Thanks,

[GMK]

Not that it matters, but it could be that the plan already distributed the benefit to the beneficiary, so another distribution would be required for the last deferral/match deposit. And if there's a distribution fee, the fee might eat up the deposited amount with the beneficiary getting little or none of it. The employer could ask to have the fee waived in this case, but some chargers of fees are not accommodating.

So, the employer may have a good motive, but that doesn't trump what must be done.

[david rigby]

So, the employer may have a good motive, but that doesn't trump what must be done.

Lesson for whether or not to amend the plan prospectively?

[masteff]

Why not just specify in the accrued vacation & PT policy that unused time will be paid as a post-death benefit? It's semantics but it arguably puts this outside the exception for post-termination deferrals in the 1.415(c )-2 regs.

Which actually raises a good question... how is it being paid?