415 limits and allocation to other Participants

[TPA Bob]

In our FIS Corbel document under Maximum Annual Additions it provides in part that if an employer contribution that otherwise would cause annual additions to exceed maximum permissible amounts the contribution is reduced and any amount in excess of the maximum permissible amount that would have been allocated "may be allocated to other Participants".

We have an employer with the only three participants who are all owners or related to owners (no other employees, all HCEs).  Two out of three of the participants have maximized their 401(k) for the year.  When we determine the 25% deductible employer contribution based on eligible compensation and we allocate based on plan formula these two participants will hit their 415 limit.  Which then per plan document would be allocated to the other owner who did not defer.

Any problems with allocating additional monies to this third participant once the first two participants have reached their 415 limit?  I have been told that this is aggressive but I cannot find any guidance that says we cannot do this.

Thanks in advance.

[TPA Bob]

I have attached an estimate of the calculation of tax deduction limit and allocation.

2018 Projection of Contribution Allocation.pdf

[Bird]

I don't see it as aggressive.  Just normal operations.

[CuseFan]

agreed. 25% deduction limit is not exceeded and no one exceeds 415, so no problem.

[Larry Starr]

8 hours ago, TPA Bob said:

In our FIS Corbel document under Maximum Annual Additions it provides in part that if an employer contribution that otherwise would cause annual additions to exceed maximum permissible amounts the contribution is reduced and any amount in excess of the maximum permissible amount that would have been allocated "may be allocated to other Participants".

We have an employer with the only three participants who are all owners or related to owners (no other employees, all HCEs).  Two out of three of the participants have maximized their 401(k) for the year.  When we determine the 25% deductible employer contribution based on eligible compensation and we allocate based on plan formula these two participants will hit their 415 limit.  Which then per plan document would be allocated to the other owner who did not defer.

Any problems with allocating additional monies to this third participant once the first two participants have reached their 415 limit?  I have been told that this is aggressive but I cannot find any guidance that says we cannot do this.

Thanks in advance.

Whoever told you it is aggressive is too conservative!  It's not only NOT aggressive, it's absolutely proper.

[TPA Bob]

Thanks all.