415 limit and Match True-Up

I have a plan that has four participants that maxed out pre-tax deferrals, all of them also made after-tax (non-roth) deferrals, and all received some safe harbor match during the year.

Based on contributions made each pay period, they all reached their 415 limit as of the last paydate.

However, the plan requires that a safe harbor match true-up be done.  Each of the four is due to receive a true-up, but that true-up will push them over the 415 limit.

Since it's a match and required by the document I'm leaning to allowing it to go through then just deal with the 415 excess and refund accordingly.  However, another person here believes that, since we know this true-up will push them over the 415 limit we should not allow it to go through, so that means they won't receive the match they are required to.

Thoughts?  I've struggled to find clarification if we should allow this true-up to go through, deal with 415 refunds, or just not provide the true-up and 415 passes.

If the plan requires it, you have to do it. The plan document will outline what refunds to do for a 415 excess.

Agree with Bill. Follow the document. It is likely that some of their VAT will need to be returned to correct 415 violations.

And maybe the document has a "If the allocation would cause the participant to exceed the annual additions limit, then...." type of paragraph that would indeed eliminate the need to fund the rest of the match. 

But yeah, if so, you gotta find it in the text.

To the extent that any of these participants are age 60 or over, please note that catch-up contributions are not taken into account as annual additions. See Code Section 414(v)(3), Reg. Section 1.414(v)-1(d)(1). If catch-up contributions would have resulted in the participant seeming to exceed the 415 limit, you can heave a sigh of relief.

43 minutes ago, rocknrolls2 said:

To the extent that any of these participants are age 60 or over, please note that catch-up contributions are not taken into account as annual additions. See Code Section 414(v)(3), Reg. Section 1.414(v)-1(d)(1). If catch-up contributions would have resulted in the participant seeming to exceed the 415 limit, you can heave a sigh of relief.

I think you meant 50 not 60. And it assumes the Plan allows for catch-up, which it likely does.

If you are self-correcting, which requires a plan to have established practices and procedures, look out for this rule in Rev. Proc 2021-30:    

"A plan that provides for elective deferrals and nonelective employer contributions that are not matching contributions is not treated as failing to have established practices and procedures to prevent the occurrence of a § 415(c) violation in the case of a plan under which excess annual additions under § 415(c) are regularly
corrected by return of elective deferrals to the affected employee within 9½ months after the end of the plan’s limitation year."

If you are going to self-correct now for a plan with a calendar year limitation year in the manner you suggest, you may have to take the position that you had established practices and procedures to pay out the excess deferrals by 10/15, but failed to follow them. Make sure you are comfortable with that before proceeding.