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Ok, I understand. And the answer is it depends. The true up is really coming from employees that defer the max early, and or change their deferral percentages at various times through out the year. Here are two of my legit examples: I have a true up plan that had a payroll total of 280,250.59. True up is 14,025.20. Another safe harbor true up plan was 191,176.06 per payroll. True up is 8,462.18. Even with these examples, it is highly dependent on the deferral patterns of the employees.

We've never tracked that percentage - but I can tell you that the true-up is a VERY small percentage - if you forced me to guess, I'd say maybe 2%. That's just a guess, but it most certainly is a very small percentage. At least for us - others may have a different experience.

There is no reason other than a failed 401a4 test that would preclude this.

I suggest you consider amending plan to provide a minimum run-out period of 90 days. The DOL claim regs do not require any specific number of days for accepting eligible claims, but do require reasonableness. A 45-day limit, IMO, does not meet the standard for reasonableness. The industry norm is 90 days, and allows reasonable time for claimant to receive bills (e.g., itemized receipts), file with primary plan, get EOB from primary plan showing remaining out-of-pocket expenses, and then file with FSA -- which is a very common scenario. Meanwhile the claim in question can be adjudicated past the 45-day limit. Presumably the plan already includes standard language such as "x days, or longer if events beyond the participant's control prevented the participant from meeting this timeframe."