Deferrals on Bonus

[khn]

Regarding bonuses, our client's plan document states 'participants are not permitted to make a separate deferral election, and the Participant's deferral amount elected on the salary deferral agreement will also apply to any bonus received by the participant for any plan year'.

Given that, can a participant go in and zero out their deferral just for one pay period and then change it back after they get their bonus?

I'm thinking technically it's not a separate deferral election for their bonus; they are just lowering their deferral for a pay period.

[QDROphile]

The rules and procedures for changing deferral elections are the rules and procedures for changing deferral elections.

[khn]

Understood, but if someone was to go in and lower their deferral percentage before they get paid a bonus, it would apply to all of their pay and not just their bonus payment. That's why i would think it's allowable, correct?

[Bill Presson]

Understood, but if someone was to go in and lower their deferral percentage before they get paid a bonus, it would apply to all of their pay and not just their bonus payment. That's why i would think it's allowable, correct?

It depends on how frequently they can make deferral changes. Is it each pay period? Then your golden. Is it quarterly? Then, not so much.