Plan imposed limits and catch-up

[MoShawn]

We are considering adding a plan imposed limit on HCE deferrals for a plan we administer. Has anyone seen an instance where the actual percentage limit is not specifically written into the plan? Can it be stated as a formula (i.e. "the actual deferral percentage of the NHCE group from the prior plan year, plus 2%"), or even as "an amount to be determined each plan year by corporate resolution"? Would any elective deferrals over this limit be able to be re-classified as catch-up contributions?

[Tom Poje]

at the 2004 ASPPA conference the following was posed:

"If a plan document provides that the admin committee may limit HCE deferrals in order to prevent ADP testing violations, and the administrator takes that action through resolution and not by plan amendment, is this considered to be an "employer-provided limit" so that contributions in excess of this imposed limit are eligibile to be treated as catch-up contributions?

Answer: YES

(of course such answers always carry the caveat that they might not represent the actual IRS position, but personally along similar lines of reasoning I believe what you want to write into the document should be possible. of course, you won't know what that limit is until sometime during the year, but even the regs give examples of changing an employer limit during the year and how to calculate the amount of catch up involved in such a change. the question would be: does your limit apply going forward once the % is determined, or is it averaged over the whole year.