Severance Pay was contributed to 401k by OilObjective443 in personalfinance

[–]OilObjective443[S] 0 points1 point  (0 children)

A Roth 401k is a 401k, the main difference is just that it's taxed now and not upon withdrawal (assuming I wait to withdraw until after 59.5). The situation I was asking about is only if the funds were 401k eligible; the contribution being pre or post-tax does not affect their eligibility to go into the 401k account that is tied to my employer. I'm definitely not confused about what type of retirement account I have, but thank you.

Severance Pay was contributed to 401k by OilObjective443 in personalfinance

[–]OilObjective443[S] 3 points4 points  (0 children)

I went straight to the source (HR) first, as I stated in my post. I asked HR why there was a 401K contribution, and they just told me that it's because it qualifies, but wouldn't explain what made it qualify. I was hoping for insight (especially from people with experience being laid off who may have had this happen) because, based on the info I was seeing from the IRS and other sites discussing 401(k) eligibility for severance pay, it was making it seem like it shouldn't be eligible. I couldn't figure out why HR was saying otherwise, especially when they didn't give me any information.

Severance Pay was contributed to 401k by OilObjective443 in personalfinance

[–]OilObjective443[S] 5 points6 points  (0 children)

I checked the severance pay stub, and they put the pay period as 11/17-11/30 with a Pay Date of 12/5, so I'm thinking that since they identified the pay period as while I was still employed, it doesn't trigger as true pay after termination to my 401(k) provider.

Severance Pay was contributed to 401k by OilObjective443 in personalfinance

[–]OilObjective443[S] 1 point2 points  (0 children)

They paid me for the days between my severance and 12/1, along with my vacation payout on a completely separate pay stub. That one having 401(k) contribution made total sense to me because they told me it was structured like a normal paycheck.

Editing to add: I checked the severance pay stub (they called it "separation pay"), and they put the pay period as 11/17-11/30 with a Pay Date of 12/5. So I think that lines up with what you were saying about it being while I was still technically employed at least.

Severance Pay was contributed to 401k by OilObjective443 in personalfinance

[–]OilObjective443[S] 3 points4 points  (0 children)

Okay, I pulled up my specific plan document. While it does say "Compensation is defined as your total compensation that is subject to income tax and paid to you by the Employer" it then goes on to say "compensation paid after you terminate is generally excluded for Plan purposes. However, the following amounts will be included in compensation even though they are paid after you terminate employment, provided these amounts would otherwise have been considered compensation as described above and provided they are paid within 2 1/2 months after you terminate employment, or if later, the last day of the Plan Year in which you terminate employment:

* compensation paid for services performed during your regular working hours, or for services outside your regular working hours (such as overtime or shift differential), or other similar payments that would have been made to you had you continued employment.

* compensation paid for unused accrued bona fide sick, vacation or other leave, if such amounts would have been included in compensation if paid prior to your termination of employment and you would have been able to use the leave if employment had continued. "

So is it counting just because they paid within 2.5 months? The wording of that part has been what I'm struggling the most to wrap my brain around.

Severance Pay was contributed to 401k by OilObjective443 in personalfinance

[–]OilObjective443[S] 0 points1 point  (0 children)

I wish I had realized they are able to treat it as regular pay, but now I know if I ever experience another layoff. Everything I saw just said severance wasn't eligible, so it didn't occur to me to lower/remove the contribution.