Over contribution of Safe Harbor Match

[Guest KRS401k]

An employer incorrectly calculated participants' safe harbor match contributions for 2 1/2 years, contributing too much to the plan. When the employer takes the money out of the plan, besides amending 5500s, what reporting will have to be done? Any taxation?

Any other suggestions you have for dealing with this?

Thanks!

[rcline46]

A mistake in fact can only be taken out of the plan within 12 months of the error - consult the plan document. Amounts over that must become forfeited.

ER can only take the amount of error - no earnings. If a loss, ER must take the reduced amount or forfeit the reduced amount.

Who has been doing the testing? This should have been caught on the annual testing. And if you are told 'no testing because it is a Safe Harbor' - you just discovered that is wrong - there must be a test to determine if the SH amounts are correct. It is time to either upgrade your services if you work for a TPA firm, or get a new TPA if you represent the client.

[BG5150]

This doesn't sound like a mistake of fact, but merely a mistake.

I would correct the accounts, adjusting for earnings, and placing the funds in the plan's suspense account to be used to offset future contributions.

Note, these are not forfeitures, so they cannot be used to pay plan expenses.

[12AX7]

What BG describes is covered in EPCRS.