Participant Election and 401(a)(17) Comp Limit

[kgr12]

If a participant has a 5% deferral election in place from the beginning of the year and exceeds the $245,000 comp limit in July (meaning they only deferred $12,250 up to that point) am I correct in concluding that 401(a)(17) would say that they cannot do anything to reach the $16,500 limit after that point?

[rcline46]

Use the search function and review prior threads on this. You may find the discussions interesting.

[My 2 cents]

Not a defined contribution person, so some speculation about the rules here, but

(a) a good way to get this person to the $16,500 deferral limit is to make a deferral rate of more than 6.7% available to everyone under the plan, doing whatever is necessary to either pass ADP or meet safe harbor rules and

(b) do 401(k) plans get to count every dollar of compensation until (July in this example) you get to the 401(a)(17) limit, or must they divide the 401(a)(17) limit by the number of pay periods in the entire year and truncate the earnings that are taken into account (example - someone earns $50,000 per month and elects 5% deferrals; do you get to allow $2,500 in January or are you limited to 5% of 1/12th of the $245,000 limit under 401(a)(17) - just asking)?

[Guest Sieve]

Hint: comp does not have to be limited when administratively applying deferral percentages.

[Bird]

If a participant has a 5% deferral election in place from the beginning of the year and exceeds the $245,000 comp limit in July (meaning they only deferred $12,250 up to that point) am I correct in concluding that 401(a)(17) would say that they cannot do anything to reach the $16,500 limit after that point?

No.

You can research prior threads if you want, or you can poke yourself in the eye with a sharp stick and save time.