Catch-up 415 limit with Fiscal year Plan

[Guest rgorman]

Have a 4/1 - 3/31 plan year. Plan has deferrals and prorata profit sharing. We are running the profit sharing allocation in Quantech and it valued annually not daily.

We are maximizing the top HCE so we need to make a contribution of 19.5% of compensation to do that. However this raises some issues for another HCE.

HCE deferred $16,000 out of bonus at 12/31/04. He has also deferred $2,545.46 between 1/1/05 - 3/31/05. His comp is at the 205,000 limit.

I thought when we went to allocate the 19.5% profit sharing, that the allocation would show $3,000 as catch-up, $15,545.46 as deferrals and then based on the 415 limit of $42,000 for plan year ending in 2005, allocate profit sharing of $26,454.54.

Not the case, it gave him $3,000 as catchup for exceeding 402(g) in 2004 calendar year ending within the plan year and then gave him $4,000 in catchup for reaching the 415 limit for plan year ending 2005. So, it gave him profit sharing of $30,454.54.

My problem with this is that now he has used his $4,000 catchup for 2005, so he can only defer $14,000 in 2005.

Is there a way to say no we don't want to use the $4,000 catchup for the 415 limit ? or since the document has prorata allocation and we are doing 19.5% HCE, do we have to get him as close as possible using the catchup for 415?

Still thinking of catchup as an election of a participant to defer more, it is harder when it is due to plan or statutory limits being hit and you seem to give up the ability to elect to use or not.