overdeposit of PS - de minimis refund?

[TPApril]

This is for a 1-person plan.

Owner overdeposited by < $50.

PS amt needed to be exact due to certain limits.

I'm thinking to just cut a check out of the plan to return it.

[Lou S.]

When was the deposit made? Can you count <$50 towards 2024?

Also what limit was exceeded? The fix might be different depending on which limit was exceeded.

 

[TPApril]

ahhh...relevant questions....

contribution just made last week.

The plan is based on an old school arrangement with multiple single professionals sponsoring their own plans, all tested in combination with the employee plan. So the limit is that it must be no more than 9% so there will be no nonelective ER contributions to the staff (just safe harbor ER).

Normally yes we would have applied it to current year, but the business closed last year and these are all final contributions. The plans will all be terminating.

[Bri]

Maybe rate banding works leaving the 9% plus 50 bucks in there?

[Lou S.]

So you are failing gateway by 0.0x% or something like that? Since one doc got 9.0x% and the 3% SHNEC doesn't quite cover it?

I don't know any thing that would allow for a return of contribution in this situation. While kind a pain, an additional contribution to the NHCEs to pass testing would be the safest course.

[TPApril]

56 minutes ago, Lou S. said:

So you are failing gateway by 0.0x% or something like that? Since one doc got 9.0x% and the 3% SHNEC doesn't quite cover it?

Yes that is correct! In fact, this represents 0.012% of their pay.

  

56 minutes ago, Lou S. said:

I don't know any thing that would allow for a return of contribution in this situation. While kind a pain, an additional contribution to the NHCEs to pass testing would be the safest course.

With everything they have gone through accounting wise with the close of business and allocating costs among the various players, I anticipate they absolutely do not want to make an additional contribution.

[CuseFan]

Was the over deposit on maximum compensation? If not, maybe finding a way that compensation can be "adjusted" so contribution comes in at 9% or claim mistake of fact/math error? If max comp and a 9% PS was declared and this was a clerical error, then maybe refund on mistake of fact for that? Any adjustments, whether to comp or contrib (refund) will have some compliance risk. 

[TPApril]

So...with further review, it has been determined that an additional contribution to NHCE's would reflect 0.004%, totaling $97 shared among about 60 participants, many of whom have already taken distributions.

I'm thinking leave in the additional (de minimis) contribution (which does not violate 415 limit), consider rounding to 4 decimal points and it's a zero and that's that, with no additional NHCE contribution and no mistake of fact not allowed withdrawal.

[Paul I]

Consider keeping the contribution squeaky clean both for allocations and all other plan reporting, and having the plan pay an expense that would wipe out the excess.  Confirm that the plan allows for payment of an expense and for the employer to reimburse the plan for any plan expense not paid for by the company.