Calculation of Catch-up Match

[Gruegen]

Assume that the following:

Plan Information

* matching formula is 50% of deferrals up to 6% of compensation

* maximum deferral rate is 8%

* plan allows for catch-up contributions

* employer wants to match catch-up contribution in same formula as 401(k) deferrals

Participant Information

* compensation = $40,000

* 401(k) = $3,200 or 8% of compensation

* catch-up = $1,000 or 2.5% of compesation

Is the participant's matching contribution $1,200? [40000*.06*.5]

Or is it $1,700? [(40000*.06*.5) + (40000*.025*.5)]

Or does the answer depend upon the verbiage in the plan document?

[Mike Preston]

The answer, of course, depends on the language of the document. But I'd be surprised if the matching was anything other than treating the catch-up as a regular contribution subject to the overall match limitations int he plan. In this case, the regular contribution gets all the match this individual is entitled to.

[Alf]

$1,200, especially if the IRS model amendment was used to adopt the catch-up provision. Although the IRS amendment does not address the match, it certainly does not affect the existing match formula and limits. I don't believe that the catch-up should be treated as a deferral subject to match if the IRS amendment is used unless the amendment also specifically includes catch-ups in the matching calculation.

[austin3515]

I thought catch-ups would only need to be created in the situation where there excess deferrals (either from failed ADP or 402(g) excesss).

It would therefore seem to me that for purposes of the match you would treat all deferrals (including catch-ups) the same for purposes of matching contributions. Especially if the match is done each pay period.

Am I missing something?

[Tom Poje]

Austin:

catch ups can also caused by a plan limitation - in this example 8% of comp