Associated match if match formula changed

[John Feldt ERPA CPC QPA]

Is there any guidance for determining the associated match (ADP refunds also cause match forfeitures/refunds) when the match formula changes during the year? The plan matched per payroll at one rate for the first 6 months, then increased the match somewhat for the next 6 months.

[Peter Gulia]

Knowing that you're a careful practitioner, let's assume you already read the plan's document and didn't find enough information there.

Is your query about whether an excess is treated as attributable to the latest contributions in the year or as evenly proportioned across the whole year?

 

 

[Tom Poje]

John,

I would lean toward using logic similar to what is found for situations in which plan limits for catch-up contributions are changed

 

These final regulations retain the rule in the proposed regulations that a plan that changes an employer-provided limit during the plan year is permitted to use a time-weighted average of these limits as the employer-provided limit. For example, under this alternative method, a plan that provides for an employer-provided limit of 8 percent for the first six months of the plan year and 10 percent for the second six months is permitted to use 9 percent as the employer-provided limit for the plan year. These final regulations also provide that the plan is permitted to use the definition of compensation used for ADP testing purposes for this weighted-average simplification, and can use this alternative method without regard to whether the employer-provided limit is changed during the plan year. 1.414(v)-1(b)(2)(i)(B)

 

[ESOP Guy]

It has been a long time and I might be getting excess contributions and excess deferrals mixed up.  But there is a code P for the 1099-R that goes a years.  Code P on the 2017 instructions says you use this code to report excess contributions taxable in 2016. An 8 is excess taxable in 2017.  I have a vague memory that says if you had an off calendar year you could get the code P and it was because you had to take the excess contributions from the first dollars.

I might have the wrong type of excess as I am out of the 4k business and I was never a 1099-R expert.  I just always remembered you could have to send to people a 1099-R in Jan 2017 that told them they had a taxable distributions in 2016 and it was some kind of FIFO rule that caused it.  Back at one of my old 4k TPA firms we had a whole letter explaining to people how to do their taxes when it kind of rare facts set came up. 

 

So happy to be told I am wrong or it doesn't apply.