On May 25th, the IRS issued proposed regulations which clarified its definition of compensation. These regulations indicate that payments made within 2½ months following severance from employment are eligible compensation to defer. You must elect to defer this compensation in the month prior to the month your leave is cashed-out,  and now the date of the payment must be within 2½ months of your termination date. If you are terminating employment and wish to defer some of your leave payout, contact our Service Center for assistance.