Can deferrals be accelerated for terminating employees or employees go

[Alf]

We have two employees who will get no pay for December. One is terminating and the other is going on unpaid leave of absence for the rest of the year. In a calendar year cafeteria plan, can we take three paychecks worth of their elected deferral amounts out of their last checks this month so that their annual elections amounts will be met for the plan year?

[Guest]

Your plan document should specify how deductions will be made. If it's silent, I think you're being fairly agressive if you do this.

[Lisa Hand]

Unless your plan document and the participants' enrollment forms clearly state that your plan has a mandatory final paycheck rule where you take the entire final deduction out for ALL terminating employees, you risk violating the uniform risk rule by requiring the terminating employee to make extra deductions without disclosing this prior to enrollment. In addition, if your plan does include this language, you may be violating state wage laws as well as COBRA requirements. In regards to the employee on unpaid leave of absence, they are not terminated and how their pariticipation should be handled depends on whether it is a FMLA leave or a non-FMLA.