When does eligible compensation start?

[AlbanyConsultant]

This plan has monthly entry after satisfying one Year of Service and uses DOP comp. We've always just asked for compensation from the entry date and not asked for detail on it. This year, their new bookkeeper is questioning what compensation is correct.

They have two payroll cycles: weekly and monthly. She believes that DOP comp should be counted based on the check date (i.e., when it would otherwise be available to the participant)... which would make the March monthly payroll, where the check will be dated 4/2, eligible for someone whose entry date is 4/1. But that means that there is one month of eligible compensation on which the new participant didn't get to defer. That doesn't seem like something the IRS would approve of. It's less of a big deal on the weekly payroll because it's s shorter timeframe, but the issue is still there.

I asked her that if she thinks you have to go back and include the prior month, should she allow deferrals on that (in this case, March) pay... and if so, what if the employee terminates on 3/28 (before they are technically eligible)? Mind... blown.

Is there a bright-line rule on this? EOB was uncharacteristically unhelpful. Thanks.

[Bill Presson]

We have always used check date. So if a participant enters 4/1, they would complete the deferral election form and the amount would be deducted from the 4/2 check.

If it's paid on 4/2, it's not March pay.

Just like if it's paid on 1/2/13, it's not 2012 pay.