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It doesn't look like anyone wants to answer, so I'll give it a try. If the HCE was eligible for the contribution when it was deposited and the employer followed the terms of the document when it was deposited, I think a later application of employer discretion to remove the previously allocated contribution violates the anti-cutback rules of Section 411(d)(6). See 1.411(d)-4, Q&A 4. Our document requires the employer to designate in writing the amount of contribution for each allocation group. That's in the DC LRM's so I would expect your document to have the same requirement. The contribution in your question was allocated, so it appears the employer provided instructions about the allocation. So, based on the details provided, I think they can't do that. Going forward, they should either allocate the contribution after the end of the year or change their policy.

Then if you are talking about 2021 for a 3 month plan year - 415(c) is 58,000 x 25% = 14,500 401(a)(17) is 290,000 x 25% = 72,500 Max match in your example is 4% of 72,500 = 2,900. With the $6,500 catch-up your maximum allocation for the short year would be $21,000. So if they are getting the full $2,900 match (and no other employer contribution) they could defer up to 18,100 without exceeding the 415(c) limit.

Sure, it could be a friendly IRS letter then, and if so, they should end it with "Have a nice day!" 🙂

Also keep in mind that timing of distributions is a protected benefit, so for existing participants you can't change it from, say, immediate to a One Year Break.

so if they are not age 50, they are stuck with $14250 in deferrals - not the 19500?? That is my question that I had posed to me today?