Catch Up Exceed 100% of Comp

I know this has come up several times on here with considerable back and forth.

Any chance we can get some definitive answers on the topic of whether catch up contributions are allowed to exceeds 100% of comp? The argument relates to Internal Revenue Code Section 414(v)(3)(A)(i) not actually specifying a requirement for 100% of comp for catch ups.

So just to confirm:
-All 50+ year olds are able to tack on extra $6,500 to 100% of their comp (if comp is below the 415 specific dollar amount limit)?

-Some 50+ year olds are able to tack on the extra $6,500 to 100% of their comp and depends on certain facts and circumstances?

-No 50+ year olds are able to tax on the extra $6,500 to 100% of their comp and those that claim that 414(v)(3)(A)(i) allows for effectively excess of 100% of comp for catch ups are mistaken?

Here are a couple of examples as food for thought (if you were able to confirm treatment for each you'd be a rockstar):
-$10,000 self employed schedule C and 50+

-$0 self employed schedule C and 50+

-(negative $5,000) self employed schedule C and 50+

-$20,000 W2 and 50+

-$58,000 W2 and 50+ while using after tax contributions

-$61,000 W2 and 50+ while using after tax contributions

-$20,000 in a partnership

Maybe I'm not reading the question the way meant it, but you cant defer compensation you don't have.  If you have $20,000 in compensation, you cannot defer more than $20,000 under any scenario.  

I think that what you are really referring to is whether you can contribute catch-up in excess of the annual additions limit in 415(c), which is the lesser of $61,000 or 100% of compensation for 2022.  Catch-up contributions are not considered for annual additions, so it is possible to have total contributions in excess of the annual additions limit, and total contributions in excess of compensation.

What your scenario is missing is employer contributions.  For example:

Quote

 

X, a catch-up eligible participant, has $27,000 in compensation for 2022.  The plan has a 4% match.  The annual additions limit for X is $27,000 (lesser of $61,000 and 100% of compensation.)

X defers $20,500 in elective deferrals and $6,500 in catch-up. The plan matches $1,080 (4%), for total contributions of $28,080.  $28,080 is obviously more than 100% of compensation, but X only contributed $27,000, and since the catch-up contributions are not included for annual additions, and no limit has been exceeded.

Y, a catch-up eligible participant, has $20,000 in compensation for 2022.  The plan has a 4% match.  The annual additions limit for Y is $20,000 (lesser of $61,000 and 100% of compensation.)

Y defers $20,000 in elective deferrals and the plan matches $800, for a total contribution of $20,800.  Since $20,800 is in excess of annual additions for Y, $800 of Y's deferrals are recharacterized as catch-up, and no limit has been exceeded. 

 

Does that help?

15 minutes ago, RatherBeGolfing said:

Maybe I'm not reading the question the way meant it, but you cant defer compensation you don't have.  If you have $20,000 in compensation, you cannot defer more than $20,000 under any scenario.  

I think that what you are really referring to is whether you can contribute catch-up in excess of the annual additions limit in 415(c), which is the lesser of $61,000 or 100% of compensation for 2022.  Catch-up contributions are not considered for annual additions, so it is possible to have total contributions in excess of the annual additions limit, and total contributions in excess of compensation.

What your scenario is missing is employer contributions.  For example:

Does that help?

So what you're effectively saying is that the output of this rule every time is "For catch up eligible people the only thing they can get away with is having the match take them beyond 100% of compensation?" since the catch up effectively frees up space so the match when added to the rest of contributions can exceed 100% of comp?

Also just to be sure this is true whether we're talking pre-tax deferrals, Roth deferrals, or *after tax contributions* (non Roth after tax contributions that are not elective deferrals)?

13 minutes ago, jd1433 said:

So what you're effectively saying is that the output of this rule every time is "For catch up eligible people the only thing they can get away with is having the match take them beyond 100% of compensation?" since the catch up effectively frees up space so the match when added to the rest of contributions can exceed 100% of comp?

Yes.

20 minutes ago, jd1433 said:

Also just to be sure this is true whether we're talking pre-tax deferrals, Roth deferrals, or *after tax contributions* (non Roth after tax contributions that are not elective deferrals)?

Yes, you cannot make any employee contributions in excess of compensation.  Think of it this way, when compensation is paid, you can either put the cash in your pocket or contribute it to the plan.  You cant contribute more money to the plan than you could have put in your pocket. 

19 hours ago, RatherBeGolfing said:

Yes.

Yes, you cannot make any employee contributions in excess of compensation.  Think of it this way, when compensation is paid, you can either put the cash in your pocket or contribute it to the plan.  You cant contribute more money to the plan than you could have put in your pocket. 

But a schedule C business can contribute more in the owners elective deferrals + match + catch up than the business earned on a net schedule C basis because of the examples covered?

6 minutes ago, jd1433 said:

But a schedule C business can contribute more in the owners elective deferrals + match + catch up than the business earned on a net schedule C basis because of the examples covered?

The owner can make deposits greater than their income. Sure. But as has been stated they can not make elective deferrals that are greater than their earned income. By definition any dollar that is above 100% of their income can not be elected to be deferred because you can only elect to defer income, you can't defer what you don't have.

That is elective deferrals can never exceed income.

Now if you've deposited too much the question becomes can you correct it under EPCRS as a deferral in excess or  the 415 limit through a refund or do you have nondeductible employer contributions subject to an excise tax that needs to remain in the plan.