Plan Imposed Limit

[fiona1]

Let's say a plan imposes a 6% limit to their HCE's.

They have one HCE who contributes 6.6%.

Some of that can be classified as catch-up contributions, but not all.

Does the remaining money have to be sent back to the HCE?

[SoCalActuary]

The obvious answer is that you must follow the terms of your document. That is the position IRS takes on audits of these plans.

[Lori Friedman]

Operational failure. For obvious and numerous reasons, you don't want that to happen.

[Guest Midas]

fiona - is the plan imposed limit outlined in the document? If so, you can can classify deferrals over and above the plan imposed limit as catch-up. If the amount over and above the plan imposed limit exceeds the HCE's catch-up eligibility (i.e. greater than $3,000 for 2004), then Lori is right, you have an operational failure. Forfeit excess to use to reduce future employer contributions. The employer will need to pay the HCE.