MMC Benefits Handbook
Separation from Service Due to a Reduction in Hours
A Separation from Service occurs when the number of hours you perform paid service for the Company in a week is 20% or less of the average weekly hours you worked during the previous 36 month period. Generally, if you perform service on a salaried-paid basis, your regularly scheduled hours are used to determine the number of hours performed, and if you perform services on an hourly-paid basis, your actual paid hours will be used to determine if a Separation from Service has occurred.
You do not have to terminate employment to incur a Separation from Service. For example, if Carol has had regular scheduled hours of 40 hours per week during the previous 36 months and her regularly scheduled hours are reduced to 8 hours per week on May 1, and the reduction in her schedule is expected to continue for an indefinite period, she will incur a Separation from Service on April 30, her last day of work at the 40 hour schedule.
If you terminate your employment and discontinue all paid service for the Company, you will incur a Separation from Service. However, if you terminate your employment but continue to perform paid service for the Company on any basis, e.g., through a third party temporary agency, you will incur a Separation from Service on your last day of work only if the number of hours you work per week are 20% or less than the average number of hours you worked per week over the previous 36 months. For example, Henry has had regularly scheduled hours of 40 hours per week for the previous 36 months. On May 1, he terminates employment but continues to provide service to the Company through a third party agency at an average rate of 10 hours per week. The 10 hours per week is more than 20% of the average 40 hours per week that Henry worked during the previous 36 months. Therefore, Henry is not separated.
When Payments are Made following A Separation from Service Due to a Reduction in Hours
When you incur a Separation from Service due to a reduction in hours, the vested 409A BEP Benefit that is accrued as of the separation date, less any portion of the 409A BEP Benefit that may have already been paid, must commence effective with the later of
  • the calendar month following the calendar month in which you separate from service, or
  • the calendar month following the month in which you attain age 55,
whether or not you are performing paid services for the Company at that time. Your first payment must be delayed until the fourth month following Separation from Service, unless you are a Specified Employee. See "Seven Month Delay Period for Specified Employees" for details.
If payments are delayed beyond your commencement effective date, your first payment will include any delayed monthly payments. For example, Susan incurs her first Separation from Service when she is age 49. She is not a Specified Employee. The portion of her 409A BEP Benefit that is vested and accrued as of the separation date will commence in the month following the month in which she attains age 55, whether or not she is employed by the Company on that date. Her payments will not be subject to any delay because the date she attains age 55 is later than the fourth month following her Separation from Service. Another example: George incurs his first Separation from Service on January 1, 2013 when he is age 60. George is not a Specified Employee. The portion of his 409A BEP Benefit that is vested and accrued as of his separation date will commence effective February 2013, however, he would not receive the first four monthly payments until May 2013, the fourth month following his Separation from Service.
Seven Month Delay Period for Specified Employees
A Specified Employee is generally an employee who is one of the Company's top-paid officers.
If you are classified as a Specified Employee and your Separation from Service is due to a reduction in hours, the vested 409A BEP Benefit that is accrued as of the separation date, less any portion of the 409A BEP Benefit that may have already been paid, must commence effective with the later of (i) the calendar month following the calendar month in which you separate from service or (ii) the calendar month following the month in which you attain age 55. However, the first payment must be delayed until the seventh month following your Separation from Service. If payments are delayed beyond your commencement effective date, your first payment will include any delayed monthly payments. For example, Henry incurs his first Separation from Service on February 12, 2014 when he is age 60. Henry is a Specified Employee at the time his payments commence. The portion of his 409A BEP Benefit that is vested and accrued as of his separation date will commence effective March 2014. However, he would not receive the first seven monthly payments until September 2014, the seventh month following his Separation from Service.
Death During the Delayed Payment Period
If the payment of your 409A BEP Benefit is subject to a mandatory delay and you die during the period of the delay, the monthly payments otherwise due but unpaid at the time of your death will be paid in a single sum to your Designated Survivor. If you do not have a Designated Survivor, the single sum will be paid to your Spouse or Domestic Partner as the case may be. If you do not have a Spouse or Domestic Partner, the single sum will be paid to your estate. In no event will your Designated Survivor, Spouse or Domestic Partner or the representative of your estate be allowed to designate, directly, or indirectly, the taxable year of the single sum payment. For example: if George has a 409A BEP Benefit that is subject to a delay in payment from February to May, and he dies in April, his Designated Survivor will receive a single sum payment equal to the monthly payments George would have received for February, March and April, as soon as practicable following his death. If George had not selected a Designated Survivor, then the payment would be made to his Spouse, Domestic Partner, or his estate.