Quarterly PS contribution allocation; is the HCE's allocation limited

[Richard Anderson]

A 401(k) plan has discretionary profit sharing, and the owner wants to do quarterly allocations and deposits of a 4% ps contribution. Employees have seperate accounts and investment control. As of the first quarter the owner has over $170,000 comp for the quarter. Can the allocation to the owner be $170,000 x 4%; or must the $170,000 be pro-rated. If it is not pro-rated, the owner gets his full annual ps allocation in the first quarter, and everyone else gets their contribution in four quarterly pieces.

[Guest RNorris]

I don't think you should prorate. If this weren't the owner, but rather another employee who reached $170,000 in the first quarter and then quit, and you prorated the comp for the first quarter, you would not be giving him an equal allocation (4% of comp).

[MWeddell]

I agree. Don't prorate the $170,000 to make quarterly limits unless the plan document specifically provides for this.