Contributions and matching after 401(a)(17) limit has been reached?

How are plans typically set-up with regards to employee deferrals and matching contributions once someone hits the 401(a)(17) limit?

I believe most plans will still allow contributions once the limit has been reached (I've only seen one that stops contributions), but curious to know how matching contributions are handled once the comp limit has been reached.

Do plans have an option to match once the 401(a)(17) limit is reached or must they stop matching?  If stopping is a requirement, what section of the law/code dictates that it must stop?

Also, if matching dollars must stop at the limit, won't a plan with a true-up negate some of the negative impact a high earner might experience.  For example, a plan that matches 100% of contributions up to 6%, wouldn't that provide up to $21,000 in matching contributions in catch-up?  So maybe the impact would be the timing of when an employee potentially receives the match?

Thanks in advance.

Unless the plan is written poorly, the a17 limit is just applied when tested at the end of the year. 
 

Also, the 402g limit is likely to put the cap on any match far ahead of a compensation limit. 

This snippet from an IRS webpage makes it sound like matching contributions are supposed to stop once the limit is reached.

401k Plans deferrals and matching when compensation exceeds the annual limit | Internal Revenue Service

@MD-Benefits Guy , note that the link in your post to the IRS page also includes:

Quote

What does your plan say?

Although not common, a plan can specifically require that salary deferrals cease once a participant’s compensation reaches the annual limit.

If your plan specifies that salary deferrals be based on a participant’s first $280,000 of compensation, then you must stop allowing Mary to make salary deferrals when her year-to-date compensation reaches $280,000, even though she hasn’t reached the annual $19,000 limit on salary deferrals and must base the employer match on her actual deferrals.

The IRS is pointing out your plan document could specify that deferrals and match would stop when someone reaches the comp maximum, but the IRS is not saying that the plan document must stop deferrals and match when someone reaches the comp limit.

The example in your post illustrates that for a plan year, a participant cannot make deferrals or receive an associated match that exceeds the terms of the plan.

The IRS noted early on in the life of 401(k)s that high paid individuals who were not eligible to participate until later in the year would be disadvantaged by putting a hard stop on deferrals and match based on a plan year-to-date comp limit.

Paul I:

The example that I quoted does not reference a limit on contributions, it specifically calls out that matching can only be based on the first 280,000 of compensation.

The example that you highlighted refers to a participants ability (or inability in this example) to contribute beyond the max comp....it does not address matching.

The plan in question does not have any language that would restrict a participant from contributing after they reach the compensation max and I do not see language in the plan documents that would specifically address what to do for matching once the max is reached.

Again, the language in the example I provided states that matching should only be done up until the max comp limit is reached.

2 hours ago, MD-Benefits Guy said:

it specifically calls out that matching can only be based on the first 280,000 of compensation.

I don't think the example you posted uses the word "first", it just say's "up to".

The below paragraph from the preamble to the 415 regs is what I have relied on when this question comes up. You are not required to count compensation on a FIFO type accounting basis. (unless your document says so)

https://www.federalregister.gov/d/E7-5750/p-111

"As noted above, the final regulations provide that a plan cannot take into account compensation in excess of the section 401(a)(17) limit. In addition, the final regulations provide that elective deferrals can only be made from compensation as defined in section 415(c)(3). However, in applying these two rules, a plan is not required to determine a participant's compensation on the basis of the earliest payments of compensation during a year."

It doesn’t say “first” or “up until”.  You’re adding those things. Things generally happen in order. 
 

let’s say someone makes $2,350,000 per year and defers 1% of pay each paycheck monthly. The match formula is 100% up to 5% of pay. 
 

The person would defer $1,958.33 each paycheck and receive a match of the same. Again assuming the document is not written stupidly, that would continue during the year. The payroll would need to be setup so that deferrals stop when reaching the 402(g) limit (not the comp limit). It would also need to be setup to stop the match when it reaches $17,500 because that is 5% of $350,000 and the maximum allowable match. At the end, the $350,000 comp limit is applied. But it’s not required to be the first $350,000 earned. 

Thanks guys, I think I finally understand.  I was thinking that once comp hit 350k for the year, no additional matching was permitted.  Seems like that is not correct.  Sounds like matching dollars are still permitted after the comp limit is reached so long as the YTD match dollars don't exceed the calculated max for the year.