ACP and Excess Annual Additions

[Guest PJW]

I know that excess annual additions that are returned to a participant are not taken into account for purposes of ADP and ACP under 1.415-6(B)(6)(iv). However, that regulation specifically applies to the return of excess annual additions attributable to employee contributions. I can't find a similar provision for employer contributions (like a match). Does that mean that any excess annual addtions attributable to a match is to be taken into account for purposes of ACP?

Please help!

[Mike Preston]

Usually, the match is precluded by plan provision.

[Guest PJW]

Thanks for your help.

I think you are saying that an employer match determined to be an excess annual addition that is returned to the employer is included in testing unless it is taken out of testing through a plan provision. Is that a valid summary or am I misinterpreting your response?

[Mike Preston]

Misinterpreting.

The match provision of the document is usually overridden by the 415 language which ends up precluding the match in the first place. You don't give back what you didn't contribute.

And if you did contribute it, it wasn't what you thought it was. That is, it is NOT a match. It is merely a contribution to the plan in violation of its terms. Whether it's source is that the plan sponsor thought they were making a match or making an employer contribution is irrelevant, IMO.

What would you do if the matching formula was 100% up to 3% of pay and an individual was matched at 100% up to 4% of pay? The last 1% wasn't really a match, because it violated the plan's terms. It doesn't count in the ACP test, because it isn't a match to begin with. Same thing with a 415 violation, if the document is like the others I've reviewed this issue in.