FAQ 218: 401a4--Monthly compensation calculation for mid-year entrants that terminate

Problem: On the 401(a)(4) support pages, how does ASC compute the monthly compensation for someone who entered the plan mid-year, but was terminated prior to the year ending?

Solution: Below is an explanation of how the system comes up with the monthly compensation figure on the support page using two employees as an example: If the "Use Post-entry" box under Compensation Options on the 401(a)(4) screen is unchecked (the default): Employee #1: Months worked (rounded): 10 (January - October; terminated 11/5/2004) Full year compensation: $49,846.72 Monthly compensation: $4,984.67 ($49,846.72 / 10 = $4,984.67) Employee #2: Months worked (rounded): 11 (January - November; terminated 11/29/2004) Full year compensation: $49,449.23 Monthly compensation: $4,495.38 ($49,449.23 / 11 = $4,495.38) If the "Use Post-entry" box under Compensation Options is checked: Employee #1: Months worked after entry (rounded): 4 (July - October; terminated 11/5/2004) Post-entry compensation: $20,413.42 Monthly compensation: $5,103.36 ($20,413.42 / 4 = $5,103.36) Employee #2: Months worked after entry (rounded): 5 (July - November; terminated 11/29/2004) Post-entry compensation: $22,317.79 Monthly compensation: $4,463.56 ($22,317.79 / 5 = $4,463.56) If you want their annual compensation just divided by 12 like the other active employees, uncheck the "Use actual mos." box when running the test.