Correcting Excess Amount/Allocation

[MarZDoates]

Employer submitted a matching contribution on compensation in excess of $245,000 in 2011. The match is a fixed formula: 125% of deferral up to 4% of comp. Participant deferred $16,500 (NOT catch up elig). Correct match should have been $12,250 ( $245,000 * .04 * 1.25) Actual match was something like $15,000 ($300,000 * .04 * 1.25).

As I understand it, this is a 401(a)(9) failure creating an excess allocation of employer match. According to EPCRS, the correction is to forfeit the excess along with earnings.

Due to a subsquent QDRO distribution, the amount left in the er match source is less than the correction.

Client did all this directly with the investment provider, without going thru TPA.

Any suggestions????

Thank you!

[ETA Consulting LLC]

401(a)(9) is Required Minimum Distributions. 401(a)(17) is the dollar limit.

The funds must be returned to the plan. If not, the participant's account should be made whole; especially since the calculated resulted in amounts being distributed to a party other than the participant.

That would be my initial approach.

Good Luck!

[MarZDoates]

401(a)(17) was in my head but typed the wrong thing...sorry...thanks for the input

[MarZDoates]

I would like to revisit this.....I was reading further into EPCRS and see where the excess match may be corrected using the plan amendment correction method and increasing the allocation to the other participants by the amount of the excess match/401(a)(17) limit for the year. Does this sound reasonable?

What money source would this additional contribution need to be deposited into. Would this HAVE to go thru VCP or would self correcting be sufficient. Would this eliminate the QDRO issue? Or am I interpreting this all wrong? thanks!

[ESOP Guy]

If there is enough money in the person's account and just a shortage in a source why can't you just move money between sources to correct?

The point of correction is to get people back to the point where they would have been had the error not been done. So it seems like the correct amount was paid in the QDRO, but from the wrong sources. So why can't the first correction be get the amount in each source correct and the second correction fix the excess contribution?

I am asking, not recommending, but that seems likes the quickest fix. And at first glance seem like it is a legit fix.