401k Catch Up

[CLE401kGuy]

We've amended plans to permit HCE's only to make catch-up contributions - i.e. those HCE's age 50+ during the PY can only make up to the $5,500 and then are not permitted to make any additional elective contributions in order to have $0 contributions for HCE's in year end testing.

Is it possible to amend a plan to count any elective for HCE's age 50+ to be counted as catch-up first and then any elective over $5,500 be counted in the test - I have a plan with a mix of HCE's over / under age 50 and low NHCE participation... could be beneficial for testing with some planning to count the age 50+ HCE's first $5500 as catch-up and remove from the test as opposed to reclassifying (avoiding refund to the under age 50 HCE).

Thanks in advance

[cpc0506]

We've amended plans to permit HCE's only to make catch-up contributions - i.e. those HCE's age 50+ during the PY can only make up to the $5,500 and then are not permitted to make any additional elective contributions in order to have $0 contributions for HCE's in year end testing.

Is it possible to amend a plan to count any elective for HCE's age 50+ to be counted as catch-up first and then any elective over $5,500 be counted in the test - I have a plan with a mix of HCE's over / under age 50 and low NHCE participation... could be beneficial for testing with some planning to count the age 50+ HCE's first $5500 as catch-up and remove from the test as opposed to reclassifying (avoiding refund to the under age 50 HCE).

Thanks in advance

You cannot allow catch-up without allowing regular contributions first.

The funds can be re-classifed as catch-up only if the plan is failing testing or exceeds limits.

I might have amended the plan to limit the amount of deferrals for HCE to $5,500, but don't believe that you can state that deferrals are limited to catch-up only. However, you still run the risk of failing ADP Testing and not all of the funds being re-classified.

[CLE401kGuy]

We've amended plans to permit HCE's only to make catch-up contributions - i.e. those HCE's age 50+ during the PY can only make up to the $5,500 and then are not permitted to make any additional elective contributions in order to have $0 contributions for HCE's in year end testing.

Is it possible to amend a plan to count any elective for HCE's age 50+ to be counted as catch-up first and then any elective over $5,500 be counted in the test - I have a plan with a mix of HCE's over / under age 50 and low NHCE participation... could be beneficial for testing with some planning to count the age 50+ HCE's first $5500 as catch-up and remove from the test as opposed to reclassifying (avoiding refund to the under age 50 HCE).

Thanks in advance

You cannot allow catch-up without allowing regular contributions first.

The funds can be re-classifed as catch-up only if the plan is failing testing or exceeds limits.

I might have amended the plan to limit the amount of deferrals for HCE to $5,500, but don't believe that you can state that deferrals are limited to catch-up only. However, you still run the risk of failing ADP Testing and not all of the funds being re-classified.

Thanks for the quick response, I really appreciate it! TT

[BG5150]

Amend the plan to allow HCE deferrals up to $1. After that, they are over the plan-imposed lint and can put in an additional $5,500.

The test might fail, but any refunds would be offset by the c/u.

[austin3515]

FWIW, an extensive discussion on limiting HCE's to $1 can be found here:

http://benefitslink.com/boards/index.php?showtopic=41319

[CLE401kGuy]

Thanks everyone for your thoughts and direction, much appreciated!