otherwise occurred.
"Compensation." Shall be as follows:
(1) For any plan year, subject to the limitations set
forth below, the total wages as reported on an employee's
Form W-2 from the municipality for the plan year, including:
(i) basic contributions and elective contributions
that are not included in gross income pursuant to section
125, 132(f), 402(e)(3), 402(h)(1)(B) or 402(k) of the IRS
Code (26 U.S.C. § 125, 132(f), 402(e)(3), 402(h)(1)(B) or
402(k)); and
(ii) compensation deferred under an eligible
deferred compensation plan within the meaning of section
457(b) of the IRS Code (26 U.S.C. § 457(b)).
(2) If an employee is severed from employment,
compensation must be paid or made available to an employee
within the limitation year and must be paid or treated as
paid to the employee prior to his or her severance from
employment. For purposes of Subchapter D (relating to
contributions), compensation shall also include compensation
paid by the later of two and one-half months after the
employee's severance from employment or the end of the
limitation year in which the employee has a severance from
employment if payment is regular compensation for services
during the employee's regular working hours, or compensation
for services outside the employee's regular working hours,
commissions, bonuses or similar payments, and the payment
would have been made to the employee if he or she had
continued in employment with the municipality, or the payment
is for unused accrued bona fide sick, vacation or other leave
that the employee would have been able to use if the employee
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