Matching By Payroll Period - No True Ups

[Dennis Povloski]

DB guy asking 401k questions........

Plan is a Safe Harbor 401k with the basic match contribution. The Plan Administrator appears to be matching per payroll period with no True Ups at year end. If a participant is at the max comp level and maxes out his deferral for 2009 (not catch up eligible), is there any way that he can be allowed to receive a SHMAC of $11,339?

By my calc's 4% of $245k is $9,800.

[401king]

It's my understanding that you could allow for a true-up in a case where someone's deferrals are not "even" throughout the year. Such as when one person maxes out by deferring 100% of the first XX paychecks. In this case you can true-up, but you have to true-up the whole plan.

Your case is different in that the person requesting the true-up is an HCE. Let's say he's the only one who would be due a true-up, this might catch the attention of and auditor.

[K2retire]

The document should specify if the match is made per pay period (no true up), per plan year (requires true up) or some other choice.

[rcline46]

And NOT, he could NOT receive that much SHMAC. Match is being calculated incorrectly.

[ACox]

He should not receive more than 4% of his comp for matching contribution. The payroll is either not limiting the comp correctly, or they may be trying to match catch up contributions

[Bird]

is there any way that he can be allowed to receive a SHMAC of $11,339?

No. It's ok to match on a payroll basis, if the document so provides, but that doesn't give the right to ignore the annual comp limit. (Happens all the time.)

[Dennis Povloski]

In this case, I'm taking over a plan where the $11,339 match was deposited, and there's no indication that a correction was suggested. All the other participants are within just a couple dollars of the 4%, so that's why I figured that they must be allocating the match on a payroll basis.

The document appears very flexible. It says that if the allocation period is less than the plan year, the employer may elect to make the true-up as long as the additional SHMAC is made on a uniform, nondiscriminatory basis. In the True Up definition it refers to the "Allocation Period" which is defined as the "12 consecutive months or less for which an employer contribution is made or allocated under the terms of the Plan". There's no specific election in the document itself.

[Bird]

Not sure why you are asking about a true-up. You have a "true-down" problem.

[Dennis Povloski]

True 'dat!