Partic termed in late Dec '20 but paid in early Jan--in ADP test?

I don't have access to the EOB at the moment, I thought this was addressed in there.

Participant terminates December 28, 2020,  but the next pay date is January 5, 2021.

Is she in the 2021 ADP test even though she did NOT perform services for the employer in 2021? 

The basic gist explained in that Sal section (including crossing plan years) is how and for what year you count the compensation as 415 earnings.  If that's 415 compensation for 2021 then you'd include her in your 2021 test.

We exclude post-year end comp after severance and thus would not include it.  The problem that arises is when 401(k) contributions are made on said comp.  It happens infrequently enough that I couldn't tell you how we deal with it but I think we exclude everything from testing and just show the contribution in the financials.

40 minutes ago, Bird said:

We exclude post-year end comp after severance and thus would not include it.

I thought that was applicable for the year of termination (ability to include or exclude), so in this situation means you would not include for 2020. I think you have to include somewhere - 2020 or 2021 based on the terms of the plan - and can't just ignore. But I'll defer to someone who sees this more often.

Our document provider, under the Plan Compensation definition, allows the plan Sponsor this exclusion, "Amounts received after termination of employment are excluded."

There is also a "Few weeks rule" that can be elected in the adoption agreement which would count the 2021 pay and deferrals, if any, in the 2020 limitation year, as long as done on a consistent basis with respect to all similarly situated employees.

Possibly their plan document might address the situation.

1 hour ago, jsample said:

Our document provider, under the Plan Compensation definition, allows the plan Sponsor this exclusion, "Amounts received after termination of employment are excluded."

 

it has been a long time since I have seen such an exclusion but I thought if you did this it was subject to 414s testing as the general rule was you had to include post severance comp that was for working and would have been paid had they not terminated- as opposed to unpaid vacation pay or sick pay paid after termination.   So this exclusion isn't a statutory exclusion.   Put another way 415 comp includes trailing pay for hours worked and 414s says 415 pay is a safe harbor.  That exclusion takes you out of the safe harbor of using 415 pay.

Like I said I am doing this from memory so I am happy to be told I am wrong.

On 2/23/2022 at 9:38 AM, BG5150 said:

I don't have access to the EOB at the moment, I thought this was addressed in there.

Participant terminates December 28, 2020,  but the next pay date is January 5, 2021.

Is she in the 2021 ADP test even though she did NOT perform services for the employer in 2021? 

 

I have always understood this had to be included in the tests as long as the pay was for hours worked and not some of the other kinds of post severance comp. 

It has been a while since I have done 4k plans but that is my memory. 

Where I see a version of this is we typically would say where I work if an ESOP says there is no hours or last day requirement for retirees we would give this person a small 2021 ER Discretionary Contribution allocation since this has to be included in comp. 

If the individual was able to make elective deferrals from his / her post-severance compensation (if the deferral percentage was not 0%), then the individual was an eligible employee and should be included in the ADP test.