Attributable match question...

[jaemmons]

Participant exceeds 2004 415 limit for DC plans by $2,000. They are catch-up eligible and have the entire excess recharacterized as a catchup contribution. Their compensation is $205,000 and deferrals, prior to catchup, is $13,000.

Employer does not match on catch-up contributions and their formula is 75% up to first 6%.

Question: The match allocated to this participant was $9,225. Since the employer does not match catch-up contributions, is the attributable match on the recharacterized catchup contributions "forfeited" pursuant to correction under 401(a)(4)? If so, are they included/excluded from acp testing?

[rcline46]

There was obviously a mathematical error in calculation of the matching contribution. Return it to the sponsor as a mistake of fact.

[jaemmons]

Thanks Reed. Unfortunately, I don't see this as a "mistake in fact".

I did a little more reading last evening and came to the conclusion that the only attributable match forfeitures which may be disregarded from acp testing relate to failed adp test refunds, failed acp test refunds which relate to after-tax ee contributions and 402g violations. It does not appear that atm's relating to plan limit violations or 415 violations are taken out of acp testing. They may still be forfeited should a 401(a)(4) issue arise, but that does not appear to impact the acp test.

Thanks again for the comments.

[Bird]

Wait a sec.

The match allocated to this participant was $9,225.

I think you mean the match DEPOSITED. The correct allocation is $8,250. Anything deposited over that was simply a mistake. Would you think differently if someone calc'd the match at 100% instead of 75%? It's the same type of error.

Reed is right.

[jaemmons]

Bird,

I still don't think this qualifies as a "mistake in fact" as outlined in Rev Ruling 91-4. We usually treat these as operational failures and forfeit the excess amounts from the affected participant. Thanks for the reply.

[rcline46]

Well, we may have to agree to disagree. The match deposited was greater than the match allowed. This is obviously an error.

Now if you want to reclassify it as an employer contribution rather than returning it that's fine. However, I would NOT let it remain for the ACP test under any circumstances because the employee was never entitled to it. It is the same as if another employee's match were put into this account.

[Bird]

I can understand the thinking that it is not a mistake in fact. But if it's not, then it's an employer contribution of some sort and you have to figure out what to do with it. It appears that the match is required so it CAN'T be a matching contribution. That means it must be profit sharing. You then have to either allocate additional moneys to the other participants, or take it from him and reallocate it.

But there's no way it's in the ACP test.