| FAQ 110: Budget--Terminated employee in 401(a)(4) budget design receiving too high of a contribution |
A participant terminated in August of the plan year. If I code her a status "M" and run the budget routine, it designs a contribution almost twice as high as it does when I code her a status "A" and take out her termination date. Why?
The rate/design difference is based on the compensation selections for "Use Post-entry" and "Use actual mos.". These selections determine how the system is going to calculate the monthly compensation for new entrants and terminees. Review the 401(a)(4) documentation on our website in the Miscellaneous Notes section for an explanation of the monthly compensation calculations. You can download this document from our website if you don't have it already.