Safe Harbor Match

[Sir LB]

The plan is a safe harbor match, with on going safe harbor matching contributions.

The plan inadvertently miss calculated the match for 5 participants IE the five participant received to much safe harbor match.

Is the proper way to correct the excess match to forfeit the excess match to the plans forfeiture account (calculate gains/losses). The forfeiture safe harbor match can only be used to offset plans expenses going forward.

[Tom Poje]

I'm more than curious if that is what the document really says.

unless it was a QACA in which case you could actually generate forfeitures, I would have thought the incorrect match is tossed into suspense and used to reduce future safe harbor (it was after all 100% vested when made inadvertently to the plan.) I'd argue it is a correction under EPCRS, you are putting the plan in a position it should have been if the error hadn't occurred.

[Sir LB]

I thought going forward ie 2016 and on, any forfeiture money could not be used to fund/offset safe harbor contributions.

[Tom Poje]

the IRS frowns on forfeitures being used to fund safe harbors, because safe harbors are supposed to be 100% vested when made to the plan. the $ you are talking were not a result of someone forfeiting due to not being 100% vested. in fact, the $ you are talking about were actually 100% vested when made (even if done so in error)

Maybe the 'line' is too fine, but I would hold their is a distinction in this case.

so I could certainly be in error.

[Lou S.]

But Tom these are monies that never should have been contributed to the participant but found their way into the account due only to a payroll error that did not cap the match for some individuals. I agree with your analysis in post #2 of this thread.

[BG5150]

The EPCRS correction for an excess allocation is to remove the funds (plus earnings) and put them in a "unallcoated account." (I call it a "suspense account") NOTE: It does not say anything about "forfeiting" the money or putting it into a "forfeiture account." It further goes one to say that the ER cannot make any contributions as long as there are funds in the suspense account. That means the next ER contrib will be offset by the amount in the suspense account.

Section 6.06 (2)

If the improperly allocated amount would not have been allocated to other employees absent the failure, that amount (adjusted for Earnings) is placed in a separate account that is not allocated on behalf of any participant or beneficiary (an unallocated account) established for the purpose of holding Excess Allocations, adjusted for Earnings, to be used to reduce employer contributions (other than elective deferrals) in the current year or succeeding year. While such amounts remain in the unallocated account, the employer is not permitted to make contributions to the plan other than elective deferrals.

Nor does it say anything about whether it's a Safe Harbor or regular match or profit sharing.

It's odd that the various record keeping systems have yet to add a suspense (unallocated) account along with a forfeiture account.