Limit Catch-up Eligible Participant Contributions?

[austin3515]

Can I have a deferral limit = 5% of Compensation PLUS catch-up contributions for anyone eligible for catch-ups, but then have no limit for anyone else? Or would that be age discrimination?

[ETA Consulting LLC]

What are you trying to accomplish?

[EBECatty]

See 1.414(v)-1(e)(1)(i):

A plan fails to provide an effective opportunity to make catch-up contributions if it has an applicable limit (e.g., an employer-provided limit) that applies to a catch-up eligible participant and does not permit the participant to make elective deferrals in excess of that limit. An applicable employer plan does not fail to satisfy the universal availability requirement of this paragraph (e) solely because an employer-provided limit does not apply to all employees or different limits apply to different groups of employees under paragraph (b)(2)(i) of this section. However, a plan may not provide lower employer-provided limits for catch-up eligible participants.

[austin3515]

However, a plan may not provide lower employer-provided limits for catch-up eligible participants.

This is what you are referring to, this blows it for me, correct?

[EBECatty]

I believe so. If the goal is to provide a plan-imposed limit only on catch-up eligible participants based on their status as catch-up eligible participants, the regs prohibit it.

[austin3515]

Thanks!

[Tom Poje]

I believe it can be done if it is limited to HCEs

e.g. HCEs limited to 5% deferral

which would accomplish what you want.

[austin3515]

We did not want to limit the 45 year old HCE to 7% - only the ones over 50. The thought process being that the those over 50 can contribute more than 7% so everyone gets to save a lot and it tests better.

Tom, I just want to confirm that you agree that what I suggested will not work? I agree if I wanted to limit all HCE's across the board to 5% that would not be an issue, because it is not a separate limit applicable to people eligible for catch-ups.

[Tom Poje]

so an owner less than age 50 can defer 7%, but Mr. just barely an HCE due to comp but catch up eligible would be limited? probably a problem

[austin3515]

Edited:

so an owner less than age 50 can defer MORE Than 7%, but Mr. just barely an HCE due to comp but catch up eligible would be limited?

Correct. Problem, right?

In my scenario, the owner of course is over 50 but in theory what you said is possible. But anyway, doesn't the cited reg make it definitely a problem? Do you see wiggle room?