Catch-up Question

[MBCarey]

Concerning Catch Up Contributions. I have two HC's (one owner and one not) both over the age of 50. The owner would like to defer the maximum percentage allowed for the HC group even if it means the 2nd HC can defer nothing. If the 2nd HC defers nothing is he allowed to do the catchup of $4000.

I contend that the HC deferring nothing has not met any limit.

Your opinions please

[Guest Pensions in Paradise]

Why would one HCE deferring the max prevent the other HCE from deferring?

Anyway, what you could do is amend the plan to state that the regular deferral limit for HCE 1 is 100% of comp and the regular deferral limit for HCE 2 is 0% of comp. Thus, any deferrals that HCE 2 makes would be treated as catchup since he has exceeded a plan imposed limit.

[JanetM]

MBCarey,

I agree that he HCE deferring nothing has not met any limit and therefore can not do catch up.

Not sure about Pensions suggestion of amending the plan. You can amend to lower deferral rates for HCEs, but I see issue if allow other HCE to defer 100% and don't allow NonHCE to defer 100%.

Why not just make the plan safe harbor next year and eliminate the problem. Do a safe harbor match if they don't want to spend money on their employees.