Overpayment of Safe Harbor Match

[ERISA1]

I'm looking at a case that had a standard Safe Harbor Match (SHMAT) for 2005. That is, the plan was to match deferrals dollar for dollar up to 3%, and then, 50 cents on the dollar on the next two percent.

The sponsor misunderstood the match formula. They thought the formula was dollar for dollar up to 4% of pay.

Wouldn't you know it - almost all of the employees deferred exactly 4%. The employer made a 4% match, even though these participants should only have gotten a 3.5% match.

This kind of error must happen all of the time. Does any one know of (a) IRS sanctioned self - correction , or (b) practical suggestions?

Thanks very much.

[Guest Pensions in Paradise]

The plan may have been to have a standard safe harbor match, but what was actually communicated to the employees? I find it odd that all of the employees deferred 4% when they should have deferred 5% in order to receive the maximum match under the safe harbor formula.

Anyway, when was the match contribution made? If it was made after the end of the plan year then you can just treat a portion of it as a contribution for 2006.

[Kirk Maldonado]

Read the relevant Revenue Procedure. I think it is 2003-44, but I'm stating that from memory, so I could be wrong.