Plan Comp Limit when accrual period < 12 months

[Guest KennyH]

I am trying to determine the plan compensation limit in the following scenario and would like to know if anyone disagrees with my interpretation.

The plan matches elective deferrals "equal to 50% of the total elective employer contribution ... subject to a maximum employer matching contribution of 2% of eligible compensation for such plan year". However, the following paragraph has this additional qualifier: "... in determining the maximum matching contribution (i.e. 2% of a participants eligible compensation for such plan year), the determination shall be made separately with respect to each payroll period ...".

We have the following for a monthly payroll period:

Participant A is paid $25,000 per month and contributes 8% of compensation for January - June and 0% of compensation for July - December.

Participant B is paid $25,000 per month and contributes 4% of compensation for January - December.

Ignoring contribution and compensation limits we have:

Participant A earned $300,000 for the year, contributed $12,000 (4% of comp) and received a match of $3,000 (1% of comp).

Participant B earned $300,000 for the year, contributed $12,000 (4% of comp) and received a match of $6,000 (2% of comp)

I interpret this to mean that the annual allocation is the sum of each monthly allocation for the year. Therefore, the following from 1.401(a)(17)-1(b)(iii)(A) is relevant:

"For example, if a defined benefit plan provides that the accrual for each month in a plan year is separately determined based on the compensation for that month and the plan year accrual is the sum of the accruals for all months, then the annual compensation limit for each month is 1/12th of the annual compensation limit for the plan year."

I would therefore apply the compensation limit on a monthly basis such that Participant A is limited to a $2,500 match and Participant B is limited to a $5,000 match.

Does anyone disagree with this interpretation? If so, why?