Safe Harbor Match?

[Dougsbpc]

Suppose you have a 401(k) plan with a safe harbor match. The plan had a 6/30/18 plan year end. An HCE made salary deferrals of $18,000 from 7/1/17 through 6/30/18 ($18,500 for 2018). However he mistakenly funded an additional $500 on the next pay period on 7/15/2018 (now $19,000 for 2018). 

To correct this, the plan refunded the $500 plus earnings to him shortly after the extra $500 was funded.

That extra $500 was technically funded during the 7/1/2018 - 6/30/2019 year. He funded no salary deferrals for the year ended 6/30/2019 (other than the mistaken $500). Should he get the match on that $500 even though it was refunded to him?

Thanks.

[Dougsbpc]

Correction: I meant that he funded $18,500 from 7/1/17-6/30/18 but then also funded an additional $500 on 7/15/18 (he forgot to tell the payroll company to stop on 6/30/18.

[Bill Presson]

The plan year isn't relevant. The calendar year controls whether the amount was more than the 402(g) limit. What were the amounts during calendar year 2018?

[Dougsbpc]

$19,000. Knowing he was over the limit, the plan refunded $500 to him.

Question: Does he get a safe harbor match for the $500 contributed in the 7/1/18-6/30/19 year?

[BG5150]

No.  You do not get a match on a 402(g) excess.

[Kac1214]

$19,000 for 7/1/18-7/15/19 is not (necessarily) a 402g excess and should not have been refunded to him.

He could have deferred 36,500 for 7/1/2018-6/30/2019 if done right. 

 

[Mike Preston]

52 minutes ago, Kac1214 said:

$19,000 for 7/1/18-7/15/19 is not (necessarily) a 402g excess and should not have been refunded to him.

He could have deferred 36,500 for 7/1/2018-6/30/2019 if done right. 

 

smh

[Kac1214]

20 hours ago, Mike Preston said:

smh

401(k) Deferral Limit

The IRS limits the amount a person can defer into a 401(k) plan each year, including catch-up contributions. Because that limit has implications with respect to each individual’s income taxes, the annual dollar limit is always applied on a calendar year basis regardless of the year on which the plan operates. Consider this example:

Audrey is a participant in the Great Northern 401(k) plan that operates on a plan year that runs from July 1st to June 30th. The current 401(k) deferral limit is $18,000 per year, and the catch-up contribution limit for those who are age 50 and older is an additional $6,000 per year. Audrey turns 50 in January of 2017.

Audrey’s deferrals for calendar year 2016 are limited to $18,000, but she is able to defer $24,000 for calendar year 2017 ($18,000 in “regular” deferrals + $6,000 in catch-up contributions). That means it is possible for her to defer a total of $42,000 for the plan year without exceeding the limit for either calendar year.  (Note - My limits were off, 2017/2018 vs 2018/2019 but point remains)

 

[AKconsult]

According to the OP the participant deferred $19,000 in calendar year 2018.  The fact that the plan runs on a 7/1-6/30 plan year is not relevant.  (yes it is possible to defer $37,500 for the PLAN YEAR 7/1/18 - 6/30/19 but that does not change the fact that he cannot defer more than $18,500 for calendar year 2018).  There was a 402g excess for 2018 of $500 that was refunded.  No match should be calculated on the $500 excess that was returned. 

[Mike Preston]

31 minutes ago, AKconsult said:

According to the OP the participant deferred $19,000 in calendar year 2018.  The fact that the plan runs on a 7/1-6/30 plan year is not relevant.  (yes it is possible to defer $37,500 for the PLAN YEAR 7/1/18 - 6/30/19 but that does not change the fact that he cannot defer more than $18,500 for calendar year 2018).  There was a 402g excess for 2018 of $500 that was refunded.  No match should be calculated on the $500 excess that was returned. 

Bingo repeated. Still smh. Reading with comprehension is a forgotten skill.