Excess contribution ( profit sharing)

[PS]

One of the Terminating plan there was a excess employer match for 7 part's ( profit sharing) out of 7 asset was recovered for 1 since the other 6 had already taken distribution ROE letters have been sent.  Since the plan is Terminating Plan sponsor would like to know how we can recover the assets since none of them are responding.  I informed the plan sponsor they can fund/send the excess amount so that we can post the OM (orphan match) into the forfeiture account and they can letter recover the assets from the part's however the plan sponsor does not want to send in the amount in this case how can the excess be handled since the plan is terminating.  What other option the plan sponsor might have? 

Thanks

[BG5150]

How much was the extra match?

[PS]

there are 7 affected part's and the total amount is $35,427.24 ( excess)

[BG5150]

Geez.  That's a lot.

[PS]

yes, what option does the client have? since they are unable to recover the amount and the plan is terminating. 

[BG5150]

Is there a way of doing an 11-g amendment letting them keep the higher match?  Are they mostly NHCEs?

[PS]

I guess its the NHCEs, since the plan has already terminated and its only the assets that needs to be zeroed out can an amendment still be done? I thought all amendments should be done before the termination of the plan. 

[Bird]

On 11/12/2021 at 4:41 PM, PS said:

there was a excess employer match for 7 part's ( profit sharing)

why is the parenthetical "profit sharing" there?

[PS]

I believe it was the profit sharing over match. 

[PS]

its was for the NHCE's. 

[Bird]

20 hours ago, PS said:

I believe it was the profit sharing over match. 

A. What is your role in this (more bluntly, how do you not know)?

B. If it is profit sharing then I don't see how it is excess.  Profit sharing would be an optional contribution and once made, generally not recoverable.  Who said it was "excess" and what did they mean?

[BG5150]

3 minutes ago, Bird said:

Profit sharing would be an optional contribution and once made, generally not recoverable. 

If it was a pro-rata allocation based on participation pay, but got allocated on full-year pay, it would be considered an excess allocation (unless an 11-g amendment was done and testing then passed--which it would b/c it was only NHCE).

Or pro-rata and these people just so happened to get allocated too much by accident.

[C. B. Zeller]

43 minutes ago, Bird said:

B. If it is profit sharing then I don't see how it is excess.  Profit sharing would be an optional contribution and once made, generally not recoverable.  Who said it was "excess" and what did they mean?

Only if the plan document says that the contribution will be a discretionary amount. If the document dictates a fixed contribution (not allocation) formula, then there could be an excess contribution.

Regardless, I strongly suspect the answer to the original question is to be found in the plan document. Assuming that the plan document provides for a discretionary profit sharing contribution amount, it probably also says  that the contribution will be allocated according to the allocation formula specified in the document (which might be pro rata, individual groups, or something else). In that case the contribution must be allocated to participants.

If the contribution was designated as a match by  the plan sponsor at the time it was made, then apply the same analysis, but with respect to whatever the plan document says about matching contributions. If it says that the matching contribution will be a discretionary amount, then it has to be allocated under the formula described in the plan document for matching contributions. If the document says that the matching contribution will be determined using a fixed formula, then it is possible that  there was an excess contribution, which would be a failure to follow the plan document.

[Bird]

C'mon people, I said "generally."  I won't waste everyone's time responding.  Let's see what the original poster has to say.

[PS]

 I'm not an expertise with testing.  The plan appears to have allocated non elective contributions based on compensation in excess of the prorated 1.401(a)(17) limit, As per the plan document they had opted for Discretionary Formula - The Employer may decide each Contribution Period whether to make a discretionary Non-elective Employer Contribution on behalf of "eligible" Participants. and had selected   Non-Integrated Allocation Formula - In the ratio that each "eligible" Participant's Compensation bears to the total Compensation paid to all "eligible" Participants for the Contribution Period.  As BG5150 stated these are NHCE's.  

[BG5150]

Is there still time to do an 11-g amendment?  Is it even possible?

[PS]

This plan still has few part's with balance, so we are yet to do the final force out for the non-responsive part's.  There is also balance in the forfeiture account which the plan sponsor will need to exhaust, I have the same question if an amendment can be done now? is it possible? 

[Bird]

17 hours ago, PS said:

 I'm not an expertise with testing.  The plan appears to have allocated non elective contributions based on compensation in excess of the prorated 1.401(a)(17) limit, 

Can you give an example?  

[PS]

I looked at the plan document once again and there was an amendment in 2016.  The plan has a Fixed Nonelective formula based on groups and a Discretionary Non Integrated Profit sharing.  The plan was amended effective 1/1/2016 to add the Disc. Profit sharing.  The testing results for the excess were based on their Fixed Nonelective profit sharing that was funded for 2020 for the profit sharing.  This was a an employer contribution and not match (profit sharing contribution). 

[Bird]

I'm sorry, I can't help. Makes no sense to me. 

[BG5150]

PS, give us an example of one of the people.  How much should they have received via the formula and how much they got?  Show the formula and comp.

[PS]

I'm not sure on the formula that was used. 

[BG5150]

Then how do you know there were excesses?

[PS]

notified by the testing team.