Deferral/Catch Up and Compensation Limit

[LMOC]

Over 50 HCE has hit the $265K Salary Limit but has not put in the Catch Up contributions. Given that we look at compensation, etc. at year end, could they put in catch up with salary over $265K now as long as they don't go over the 402g limit and the plan's deferral percentage limit annually with their $265K Salary?

[Tom Poje]

the preamble to the final 415 regulations states that:

As noted above, the final regulations provide that a plan cannot take into account compensation in excess of the section 401(a)(17) limit. In addition, the final regulations provide that elective deferrals can only be made from compensation as defined in section 415©(3). However, in applying these two rules, a plan is not required to determine a participant's compensation on the basis of the earliest payments of compensation during a year.”

in other words, things don't grind to a halt once someone hits the comp limit (unless I suppose you actually wrote a document to say 'once you hit the comp limit that is it. end discussion, no more deferrals'