415 Comp / Back Wages

[austin3515]

How does 415 handle back wages? Client had a settlement and to pay employees back wages from a couple of years ago. It seems like they should be eligible for the employer contribution (fixed % of pay), but it seems hard to justify based on what I know the final 415 regs.

[Everett Moreland]

1.415©-1(b)(6)(ii)(A):

(ii) Special timing rules—(A) Corrective contributions. For purposes of this section, if, in a particular limitation year, an employer allocates an amount to a participant’s account because of an erroneous forfeiture in a prior limitation year, or because of an erroneous failure to allocate amounts in a prior limitation year, the corrective allocation will not be considered an annual addition with respect to the participant for that particular limitation year, but will be considered an annual addition for the prior limitation year to which it relates. An example of a situation in which an employer contribution might occur under the circumstances described in the preceding sentence is a retroactive crediting of service for an employee under 29 CFR 2530.200b–2(a)(3) in accordance with an award of back pay. For purposes of this paragraph (b)(6)(ii), if the amount so contributed in the particular limitation year takes into account actual investment gains attributable to the period subsequent to the year to which the contribution relates, the portion of the total contribution that consists of such gains is not considered as an annual addition for any limitation year.

1.415©-2(g)(8):

(8) Back pay. Payments awarded by an administrative agency or court or pursuant to a bona fide agreement by an employer to compensate an employee for lost wages are compensation within the meaning of section 415©(3) for the limitation year to which the back pay relates, but only to the extent such payments represent wages and compensation that would otherwise be included in compensation under this section.

[austin3515]

Beautiful... Thanks!!