Determination of Vest % for 401(m) excess match contribution

[Guest KennyH]

At what point do you determine the vesting % for an ACP corrective distrubtion of an excess aggregate contribution?

1) At the date of distribution?

B) The end of the plan year for which the excess was contributed?

III) Something else?

TIA!

[ETA Consulting LLC]

At the end of the plan year for which the excess was contributed.

Good Luck!

[Tom Poje]

but see also 1.401(m)-2(b)(5) example 7

ee was 60% vested

ACP distribution is 1000

could distribute 600 and forfeit 400

or distribute 1000 and then 'track the vesting'

i.e. after 2 more years the person would be 100% vested so no forfeiture needed.

[Guest KennyH]

At the end of the plan year for which the excess was contributed.

Good Luck!

Do you have a cite for this interpretation?

[Guest KennyH]

but see also 1.401(m)-2(b)(5) example 7

ee was 60% vested

ACP distribution is 1000

could distribute 600 and forfeit 400

or distribute 1000 and then 'track the vesting'

i.e. after 2 more years the person would be 100% vested so no forfeiture needed.

Thanks, I was aware of this possibility. It isn't an option in this case.

[ETA Consulting LLC]

At the end of the plan year for which the excess was contributed.

Good Luck!

Do you have a cite for this interpretation?

1.401(m)-2(B)(iii)(2)

Correction through distribution—(i) General rule. This paragraph (b)(2) contains the rules for correction of excess aggregate contributions through a distribution from the plan. Correction through a distribution generally involves a 4-step process. First, the plan must determine, in accordance with paragraph (b)(2)(ii) of this section, the total amount of excess aggregate contributions that must be distributed under the plan. Second, the plan must apportion the total amount of excess aggregate contributions among the HCEs in accordance with paragraph (b)(2)(iii) of this section. Third, the plan must determine the income allocable to excess aggregate contributions in accordance with paragraph (b)(2)(iv) of this section. Finally, the plan must distribute the apportioned contributions, together with allocable income (or forfeit the apportioned matching contributions, if forfeitable) in accordance with paragraph (b)(2)(v) of this section. Paragraph (b)(2)(vi) of this section provides rules relating to the tax treatment of these distributions.

Like Poje stated, there is flexibility. But, here's the cite.

[Guest KennyH]

At the end of the plan year for which the excess was contributed.

Good Luck!

Do you have a cite for this interpretation?

1.401(m)-2(B)(iii)(2)

Correction through distribution—(i) General rule. This paragraph (b)(2) contains the rules for correction of excess aggregate contributions through a distribution from the plan. Correction through a distribution generally involves a 4-step process. First, the plan must determine, in accordance with paragraph (b)(2)(ii) of this section, the total amount of excess aggregate contributions that must be distributed under the plan. Second, the plan must apportion the total amount of excess aggregate contributions among the HCEs in accordance with paragraph (b)(2)(iii) of this section. Third, the plan must determine the income allocable to excess aggregate contributions in accordance with paragraph (b)(2)(iv) of this section. Finally, the plan must distribute the apportioned contributions, together with allocable income (or forfeit the apportioned matching contributions, if forfeitable) in accordance with paragraph (b)(2)(v) of this section. Paragraph (b)(2)(vi) of this section provides rules relating to the tax treatment of these distributions.

Like Poje stated, there is flexibility. But, here's the cite.

And where in that paragraph does it indicate that the time to determine vesting is at the end of the plan year in which the excess aggregate contributions arose?