Matching on Catch-up Contributions 401(a)(17) Limit

[jkharvey]

The plan provides for ER Match of 100% of deferrals up to 5% of compensation. This HCE has compensation of 350,000 in 2003. He made the maximum elective deferral plus cach-up for a total of 14,000. 5% of 350,000 would allow for a match of 14,000. The 401(a)(17) limit on compensation (200,000) only provides for a match of 10,000. I don't see any mention of the 401(a)(17) limit in the regulations for 414(v) so I'm saying that the 200,000 comp limit comes into play and prevents a full match on the 14,000. Am I correct? Any thoughts?

[jquazza]

You're correct, the match will be capped at 5% of 200k or $10,000.

[MGB]

I don't see why this is a law issue. I see it as a plan document wording issue. What does the plan say?

Of course, there is the problem of nondiscrimination because when the match is compared to the limited compensation, it will be a higher percentage than the match received by others.

[Brian Gallagher]

How would the person get a higher rate? If the match is capped at $10k, the rate is still 5%.

[MGB]

He gets a higher rate if the definition of "compensation" as used in the matching section of the document is not limited. I.e., if the match is based on the 350,000, producing 14,000, this will translate into 7% in a discrimination calculation.

This was all conjecture, based on the language of the plan. Obviously, if a plan had this kind of language, it has a problem. But, just because poor drafting will cause a problem, that doesn't preclude the possibility that it is written that way.