Over Paid Match

[Guest lgm]

If an employer deposits too much match on a per payroll period, and we need to take the match out at the end of the year (because match is based on annual comp), may we then apply those funds to the employer's obligation to pay a profit sharing contribuiton?

I dont beleive these funds would be considered forfeitures, since they were never supposed to be deposited, and am looking for affirmation that the employer can than use those funds for other plan purposes.

Any Thoughts?

[Archimage]

Yes, that is the way I would handle it.

[JanetM]

What about earnings on the excess amounts? Are you going to have issues with that?

[Archimage]

Good point. I was thinking from a balance forward perspective. You would need to reallocate the earnings to everyone if in a daily or SDA environment.

[MWeddell]

I would urge a little caution here. Due to the exclusive benefit rule, any payment from the trust back to the plan sponsor is likely to be questioned. This doesn't sound like a mistake of fact situation, so I'm not sure what the justification is for refunding the money back to the employer.

I'd urge the employer to contact legal counsel.

[Archimage]

Unless I am missing something I don't believe anyone mentioned returning money to the employer.

[stephen]

Nope, the discussion so far says the money will be recharacterized as a profit sharing contribution.

What if the employer was not going to make a profit sharing contribution? Could this money then be set aside to be used to offset future matching contributions?