Is severance pay included or excluded under each safe-harbor definitio

[John A]

Which safe harbor definitions of compensation include severance pay and which do not? The sources I have available seem to disagree.

All seem to agree that severance pay is included in W-2 wages (the Wages, Tips and other compensation box on W-2).

However, some say included and some say excluded for 3401(a) withholding wages, 415©3) "long list", 415©(3)"short list", and 414(s).

Can anyone clarify whether severance pay is included or excluded under these definitions? Any cites that specifically mention severance would be appreciated.

[Alf]

I believe the severance pay issue depends more on when it is paid than what the plan says. Whatever definition your plan uses, the Plan says that compensation paid to an employee will count under the plan. The latest IRS position I have heard of is that severance pay is not being paid to employees for services performed as an employee (or something to that effect). My understanding is that the IRS generally allows plans to consider severance pay as compensation if it is paid while the employee is still employed or included in the last paycheck, but not if it is paid after the employee terminates employment. Based on this logic, it probably doesn't matter what the definition of compensation is unless you have some special way of characterizing the payments as a job training or placement allowance or something like that.