Match in Excess of Cap

[bzorc]

A plan has a matching contribution of 50% of deferrals up to a maximum match of $500. During the 2015 plan year, the old TPA (the plan changed TPA 's on 1/1/16) found 20 participants who received match in excess of the $500, to the tune of $3,800. The old TPA and the plan auditor provided the amount of the excess to the new TPA and has requested the new TPA to move the excess to the Plan forfeiture account. The new TPA now asks whether earnings should be included in the amounts transferred to the forfeiture account.

I don't think earnings are applicable here, but want to see opinions nonetheless. Thanks for any replies.

 

[Tom Poje]

normally earnings associated to the excess should be forfeited as well.

otherwise, for example, you could give the owner a 20,000 match, collect the earnings and the simply forfeit the excess match, and someone has made out pretty good. 

[Bill Presson]

I agree with Tom. However, in my mind, part of this depends on the amounts we're looking at. If it's a roughly equal $190 per person error AND it would take a significant amount of time to calculate the actual earnings. I wouldn't sweat it too much.

[bzorc]

Thank you gentlemen. The excess per participant ranges from $15 to $410. Think we'll leave this decision in the hands of the new TPA.

[BG5150]

Remember, the earning don't have to be exact.  Just reasonable.