HCE Limits - 205,000 versus 12,300

[Guest LisaI]

Regarding the 401(a) limit of 205,000 - should HCE's who contribute less than 6% be allowed to contribute up to the $12,300? My understanding was that if an HCE contributed for example 4%, the maximum amount they would contribute that year would be $8200 - i.e. when their compensation reached 205K they can no longer contribute. Another person told me that they should be allowed to contribute until they reached $12,300 (205k * 6%) - regardless of the 205K.

Thanks for any assistance.

[david rigby]

What the plan does when an EE reaches the comp limit is based on plan provisions. Most plans will not require the an HCE to cease contributions when they reach $205K. Some plans will establish a maximum percent for all HCE's, but that provision is to help in passing the ADP test. If the HCE is 50+, don't forget about the make-up contributions. Plan provisions have to permit this.

Several prior discussion threads on this topic. For example,

http://benefitslink.com/boards/index.php?showtopic=16395

You can use the Search feature to look for more.

[QDROphile]

Somebody should be in trouble if the plan limits contributions in regular course based on the time during the year that a participant has earned the 401(a) (17) maximum. That may be the plan designer, the fiduciary (or the fiduciary's adviser), or the administrative service provider. There is no excuse for this to be an issue. Anyone who does not get it should not be in the business.

[Brian Gallagher]

don't forget about the make-up contributions. Plan provisions have to permit this.

Pax,

I don't think a plan MUST permit catch-ups....

[FundeK]

don't forget about the make-up contributions. Plan provisions have to permit this.

I take that statement to mean that the provision for catch-up has to be in the plan document for it to apply, not that all plans have to allow for it.

[david rigby]

Sorry if my comment was unclear. Interpretation from FundeK is what I was trying to emphasize.