401kology Posted March 16, 2023 Posted March 16, 2023 Wanted to ask if anyone has any experience with clawbacks of sign on bonuses when the plan has immediate entry and the employee defers from this compensation but it is clawed back at a later date. My understanding is that the impact on employer contributions depends on the definition of compensation in the plan document (one of the safe harbors). It is also my understanding that the 401(k) deferrals, once made are eligible deferrals at the time of deposit so that the clawback would not impact the amount of 401(k) deferrals in the employee's account. The employer contribution, and any adjustment, will depend on whether the clawback occurs in the same tax year or crosses over tax years. Does anyone have a good reference point or other items to consider? Noting here that my recommendation would be to not have these included in eligible compensation to prevent any impact on the 401(k) plan, but many large companies have immediate entry these days. Just looking for others experience. TYIA!
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now