Nonqualified Plan Distribution and Eligible 401(k) Compensation

[PensionPro]

Executive terminates 12/31/17 and is paid a 2018 W-2 for $800,000 distribution from a nonqualified plan for payment in Feb 2018.  Plan defines comp as W-2.  For 401(k) deferral purposes is this eligible comp based on the 2 1/2 months post-severance rules or is it severance pay that is not eligible comp?  Thanks!

[CuseFan]

If he would have been paid that $800k in February had he remained employed, then you have to look closer at your comp definition, but if this payment is due to/triggered by his termination of employment then I don't think there is any question that it is NOT plan compensation.

[PensionPro]

Thanks for your opinion.  It agrees with my thought process that if it is paid on account of termination then it is ineligible, but if it were amounts he would have received had he continued employment it would be eligible.

[Patricia Neal Jensen]

I use a document that permits a specific exclusion of this kind of payment.  It is helpful because it is clear.  You might review your document's compensation definitions clearly to be sure there is or isn't already language in there which would answer this question.

 

[CuseFan]

4 hours ago, PensionPro said:

but if it were amounts he would have received had he continued employment it would be eligible.

Yes, if there were no exclusions to W-2 pay comp definition.