HCE violates 415 -

[Guest CGBS]

A highly compensated ee defers more than 25% of pay. Do I have to include her "excess" deferrals in the (k) test. She is causing the test to fail and generating refunds for many of the highs. Thanks for your help.

[Guest GregSelf]

Deferrals in excess of 415 limits that are distributed as excess annual additions are not included in the (k) test. Reg Sect. 1.415-6(B)(6)(iv). If elective deferrals exceed 402(g), even if they’re refunded before the deadline, they still count in the (k) test for HCEs only. Reg § 1.402(g)-1(e)(1)(ii). Monitor 415 first, then 402(g), then (k) and (m) tests.

(Michael, can you say “major plagiarism”???) :-)

[QDROphile]

Some part of your system should be designed to prevent an excess under 402(g). A payroll deduction stop at the limit would work. That would probably also prevent an excess annual addition unless you have an unusual plan design.