Deferrals from Severance

[austin3515]

Do the same rules apply as in 401k plans with respect to 457(b) deferrals from severance? Or would it be permitted?

[austin3515]

Per 457(b):

(5) Includible compensation

The term “includible compensation” has the meaning given to the term “participant’s compensation” by section 415©(3).

And 415c3 of course includes the exclusion of severance via the regs.

[Peter Gulia]

Consider 26 C.F.R. § 1.457-4(d), which under some conditions might allow deferrals from compensation that will be paid after the participant's employment ends if the compensation is paid within 2½ months after the employment ends and is payments for accrued bona fide sick, vacation, or other leave if the former employee could have used the leave if his or her employment had continued; or is payments that would have been paid to the former employeee while he or she continued in employment with the Employer and is regular compensation for services during the Employee’s regular working hours, compensation for services outside the Employee’s regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar compensation.

But this does not allow a deferral from other pay that is paid because of severance and that would not have been paid or used by an employee.