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The payroll system is wrong.

Because they think they have to limit regular deferrals to $18K and call anything over that catchup. (Which would be fine but as in this example, you get unintended results.) What they need is a system that allows $24k if age 50+, and $18k if under, and not worry about whether they are catch-up or not b/c it is someone else's job to do that. But it's not gonna happen so as always, it falls on us to fix the mistakes/errors/systems flaws of others.

Sounds like you need TRA'86, GUST, EGTRRA and PPA restatements. Usually the hard one to find is the TRA'86 (called back then "Regional Prototypes") and we have one in case you need it.

While I agree that there could be an issue with a deemed CODA if the individual HCEs make the choice, this is an issue with most new comp plans. Change it from the HCE says yes, to the "plan committee" determined that only one HCE should receive the NEC. Other than the Deemed CODA, what other issues are of concern? I agree that the Carol Gold memo is a concern, but not sure if that is the only one. As far as age discrimination is concerned, does your opinion change if the NHCEs selected are not all the youngest eligible NHCEs?

What do you mean by " reclassifying the next $6k above that as catch-up since he's over 50."? Does he make more than $270,000? The 6% should come out of his pay until he hits $24,000 or the end of the year. If he made $400,000, the $24,000 is 6% of his pay. Don't confuse it with the % used for the ADP test. That would be 6.67% ($18,000/$270,000). You do not look at the comp limit when you are implementing the participants deferral elections. Just plan limits and 402g/catch-up. Deferrals are not "reclassified" until they go over one of the limits: 402(g), ADP test, plan limit.

Was $465 the normal contribution for the recent payrolls? Maybe they capped out on week 52, but someone just assumed the money was deducted and passed it along to the r/k because that was happening in the weeks previously. If so, it's not a 402(g) excess, but an excess allocation. See EPCRS for correction. (I agree with Bird: W2's generally get generated through the payroll software, no? So how could 18,465 be withheld and only 18,000 reported?)