1 Participant, 2 Seperate Plans Catch-Up in ADP

[Guest RS182]

Here is a unique to me situation. I have one participant, catch-up eligible, that worked at two completely unrelated employers during 2008, Company A and Company B.

At Company A she defered $4320 and was a HCE. She quits Company A March of 2008 and begins work with Company B. At Company B she defers $15,500 as a NHCE. No 402(g) limit problems so everything looks great.

Company A fails ADP testing and she is due a refund of $2200.00. Refund at company A is reclassified as catch-up contributions. Company A is happy; no actual refunds for 2008.

Meanwhile, Company B also passes ADP testing since she is a NHCE.

Since we happen to do plan administration for both plans this is brought to our attention that she actually only had $680.00 eligible to be reclassified meaning she should be due a distribution from Company A's failed ADP test; since 402(g) and catch-up are an idividual limit and not a plan limit.

How would you handle this? We are almost of the persuasion that this probably happens all the time. Except for the fact that she went to Company B that we do admin for how would Company A or we have known that she deferred $15500 at Company B? She didn't exceed a 402(g) limit. Many are tempted to take the stance of oh well she got lucky; and let tested dogs lie where they may.

Any input?

[RCK]

Just to clarify here:

Are you saying that the limit for HCE's in Plan A was $2,120?

And that she made $4,820 of catchup contributions to B? (or to a third plan?)

[Guest RS182]

Just to clarify here:

Are you saying that the limit for HCE's in Plan A was $2,120?

And that she made $4,820 of catchup contributions to B? (or to a third plan?)

No I am sorry. She deferred only $4320 while she was employed at Company A. Left Company A and went to Company B (unrelated, no CG) and deferred $15500. So it looks like this

COMPANY A - Deferred $4,320

2219.40 of the $4320 was re-classified as catch-up contributions in Plan A due to a failed ADP Test.

Company B - Deferred $15,500 (NO ADP issues since she was a new employee with no ownership)

On an total INDIVIDUAL level she deferred a total of $19,820.00 which would only leave $680 for true re-classified catch-up contributions due to a failed ADP Test.

Since there would have been no way for Company A to have known what she did in Company B; is Company A's ADP test with the re-classified catch-up wrong? Should Company A only been able to re-classify $680 of her refund and send her a check for the remaining $1,500?

Sorry this is confusing to type out.

[Kevin C]

This may help.

http://benefitslink.com/boards/index.php?showtopic=41394

[K2retire]

$4,820 plus $15,500 comes to less than $20,500 on my calculator. Where is the problem?

[Guest RS182]

Thank you Kevin that was perfect.