Is it correct in saying that a participant can only defer on pay earned? I have someone who is receiving 80% of their pay from workers comp and the employer is paying the other 20%. Are they only eligible to defer on the 20%? Anyone know where I can find information regarding whether this can be done or not?

Worker's compensation payments do not fall under any definition of plan Compensation that I've seen.

Also, Worker's Compensation payments are often specifically excluded from "Hours of Service" calculations.

I agree. And both of Harwood's stated facts are related to each other.