Ann P. West

Did you ever come up with a good response for this issue? I have the same issue and my inclination is to have the client report the payment and the tax withholdings and consider the participant to be in constructive receipt of the payment.

I'm digging up this old post to be sure that I'm not giving a client bad advice. Would like your thoughts. In the example where EE earns $2,885/week ($150,000 annual) and defers $395/wk all year long to get to $20,500 (using the old 402(g) and catch up limits). 4% match of the weekly pay is $115, and it would be applied to all 52 weeks. I agree with rcline46 that at year end looking at totals the matching contribution can all be applied to the deferrals and therefore, thoeretically, there are no matching contributions on the catch up. However, from a practical standpoint and from the client's perspective, if matching contributions are being made monthly without a year end true up, they are required to match those deferrals made by the catch up eligible person after the $15,500 limit is reached. Therefore the catch up eligible person gets a match of $6,000 in this example and the non-catch up eligible person gets a match of only about $4,500 even though they made the same 4% deferral election. I think you would be hard pressed to convince the client that they are not really matching on "catch up" contributions in this scenario. The client must program their system to continue applying the matching contribution each month to those deferrals made after the 402(g) limit is reached. If they stopped making matching contributions on deferrals made after the 402(g) limit is reached then they do not satisfy the safe harbor matching requirements.