Off year ADP failure

[Dazednconfused]

Hi,

Question regarding ADP: plan end 5/31, HCE, over 50, defers only $1,200 for plan year. ADP test fails, can the $1,200 be 'recharacterized' as catch up (or the failure amount)? There are only deferral contributions for this year so did not exceed any limit....

Thanks,

Jason

[Lou S.]

If the plan allows for catch-ups than not only can you recharaterize, you must recharaterize.

[Guest Phineas]

Assuming that the HCE mentioned is the only HCE in the plan, then it would be very easy to lower the plan limit on deferrals for HCEs (either by percentage or dollar amount). Once the plan deferral limit has been lowered, you may recharacterize, as long as it is permitted by the plan. If their are more HCEs, they must be considered when lowering the plan deferral limit for HCEs. The operative action here is that you are creating an imposed limit that would then enable you to recharacterize deferrals as catch-up contributions.

[austin3515]

Why would you impose an additional limit on the HCE beyond the current ADP test? It appears to be doing a fine job of limiting the HCE's contributions all on its own