Guest jefe96 Posted June 4, 2007 Posted June 4, 2007 PYE is 6/30. Limitation year is also 7/1 - 6/30. A group of highly paid ee's hit the comp limit, but the payroll system failed to shutoff contribution calculations so they continued to receive contributions (match and fixed % amount). Thinking that it would be ok to just pull out (reverse) the 'excess contribution' prior to PYE with any earnings? Any other suggestions?
david rigby Posted June 4, 2007 Posted June 4, 2007 This may not be a violation. Tread carefully; hitting the comp limit is not (necessarily) a trigger to cease elective deferrals. (I'm assuming this is a 401(k) plan.) Suggestions: Review the plan document. Search these Message Boards for more discussion. I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
Guest mjb Posted June 4, 2007 Posted June 4, 2007 (a)(17) does not requre that employee be prevented from making contributions in yr after comp exceeds (a)(17) limit. Only requirement is that total comp taken into account for yr not exceed (a)(17) limit. E.g, employee who makes 450k in 2007 can start 401k contribution after 7/1 even though ee has been paid 225k. Some plans are poorly drafted and limit contributions to first 225 of comp paid in yr but they are a minority.
masteff Posted June 4, 2007 Posted June 4, 2007 Our outside counsel said same thing when we had problems after some large bonuses to HCE's... limit is applied on an annual basis, not on a pay period basis. So if %'s are within annual limit then no further action required. Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra
Guest jefe96 Posted June 5, 2007 Posted June 5, 2007 I might have worded the situation incorrectly. It's not a 401k plan. It's a 401(a) MPP that receives a fixed % contribution and also receives the matching contribution that is based on deferrals to a 403b plan. The match was already shutoff. The situation is dealing with the 2.5% fixed contribution. This fixed contribution is based on per pay compensation (according to doc) and should be capped at 2.5% of 401(a)(17) comp limit. That is also what the doc says. I don't know if that changes anything. Thoughts are still to just pull out the excess, plus earnings, and then reallocate over the last few pay periods of the PY.
Tom Poje Posted June 5, 2007 Posted June 5, 2007 since section 2.06 of Appendix B of EPCRS (Rev Proc 2006-27) explains how to correct 401(a)(17) failures, there really shouldn't be guessing on how to correct this. (If you don't hace a copy, I posted one under the 401(k) board - back on April 17)
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now