Back Pay Issue - Participant terminated in 2020 before meeting last day requirement for profit share. In 2021 participant is awarded back pay after hearing officer determines a wrongful termination has occurred. How to correct for missed deferral and PSC

[ERISAQuestions1234]

Participant P is fired sometime mid year in 2020, does not meet last day requirement for profit sharing contribution. 

In 2021, participant is awarded (by a hearing officer for the company) back pay for lost wages and his/her termination is deemed a wrongful termination. Participant is reinstated as an employee and is a participant in the Plan once again. 

Is participant eligible for the 2020 profit sharing contribution he/she missed due to wrongful termination? 

Does the Plan Sponsor have a correction to make re the 2020 deferrals the participant should have been able to make with respect to the back pay? 

 

[Nate S]

I would start with the Plan Document regarding service awards to see if this or a similar issue is addressed.  Also, how was the award of back pay and reinstatement phrased as to how the employer should treat the period between the initial separation date and the reinstatement date?  If they are to be considered active and receive full credit service, then yes they would then meet the last day requirement.  The employer would have until 12/31/2021 to make the profit sharing contribution and have it still count as an annual addition to the 2020 plan year. 

If the back pay is to be treated as wages for service, then yes it should be treated as considered compensation and deferred against.  I don't believe you have a correction because the payment is only available as of the award, it was not able to be paid or separated from the general assets of the employer previously.  

[Mike Preston]

2 hours ago, Nate S said:

I would start with the Plan Document regarding service awards to see if this or a similar issue is addressed.  Also, how was the award of back pay and reinstatement phrased as to how the employer should treat the period between the initial separation date and the reinstatement date?  If they are to be considered active and receive full credit service, then yes they would then meet the last day requirement.  The employer would have until 12/31/2021 to make the profit sharing contribution and have it still count as an annual addition to the 2020 plan year. 

If the back pay is to be treated as wages for service, then yes it should be treated as considered compensation and deferred against.  I don't believe you have a correction because the payment is only available as of the award, it was not able to be paid or separated from the general assets of the employer previously.  

12/31?