Off Calendar Year Catch-Ups

[Guest BUG]

Plan year end was 6/30/2012. HCE 2011 W-2 was 12,000 and 2012 W-2 projected to be 22,500. All tests pass for pye 6/30/2011. I did not include the catch up of 5,500 in 2011 when allocating the profit sharing contribution for pye 6/30/2012. HCE's total annual addition for 6/30/2012 is 56,500. I can recharactorized 5,500 of HCE deferral as 2012 catchup and the remaining 1,000 to be returned. My question is, since I already used the full 2012 calendar year catch of of 5500 at 6/30/2012, should the HCEs 2012 W-2 be limited to 17,000.

[Kevin C]

should the HCEs 2012 W-2 be limited to 17,000?

No. The HCE can still defer the full $22,500 for the calendar year. The $5,500 of 2012 deferrals reclassified as catch-up due to the 415 limit at 6/30/2012 does not count against the 2012 402(g) limit. That means when the HCE gets to $17,000 in deferrals for 2012, only $11,500 of the 402(g) limit has been used. See 1.414(v)-1(h) example 5, including paragraph (v).

As for the remaining $1,000 in excess of 415 at 6/30/2012, you will need to check the plan document. You will likely find that the automatic correction method previously used was replaced with a reference to using EPCRS.

[Guest BUG]

should the HCEs 2012 W-2 be limited to 17,000?

No. The HCE can still defer the full $22,500 for the calendar year. The $5,500 of 2012 deferrals reclassified as catch-up due to the 415 limit at 6/30/2012 does not count against the 2012 402(g) limit. That means when the HCE gets to $17,000 in deferrals for 2012, only $11,500 of the 402(g) limit has been used. See 1.414(v)-1(h) example 5, including paragraph (v).

As for the remaining $1,000 in excess of 415 at 6/30/2012, you will need to check the plan document. You will likely find that the automatic correction method previously used was replaced with a reference to using EPCRS.

I recall, perhaps in a compliance nightmare, a circumstance, fail ADP???, that would reduce the calendar catchup amount available. In this case, the participant would defer only to the "available" limit, if participant exceeded the "available" limit, then 402g refund. My question - is there any condition that would actually reduce the maximum calendar year deferral for an off calendar year plan?

[ETA Consulting LLC]

My question - is there any condition that would actually reduce the maximum calendar year deferral for an off calendar year plan?

Let's suppose you're entire deferrals for the PLAN YEAR ending 6/30/2012 where actually made between 7/1/2011 and 12/31/2011. In this event, an ADP failure would create a catchup amount in 2012 (reducing the amount that the HCE may defer during 2012).

Now, let's suppose that a portion of the deferrals for the PLAN year ending 6/30/2012 were actually made between 1/1/2012 and 6/30/2012. In this event, catchups due to ADP failure would begin to apply to these deferrals (allowing for the participant to defer the full $22,500) for the 2012 calendar year.

Good Luck!