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. 

Re-opening this thread for clarification in practice. The plan document only limits the annual compensation limit to the 401(a)(17) limit - no shut off. And the issue is on the match, not deferrals. The match formula is 100% up to 2% and the determination period is each pay period. The matching contributions stopped at once the employee's compensation reached the 401(a)(17) limit for the year (2025) but the employee had not received $7,000 in match for the year. The plan does not include a true-up provision. Question is whether that was correct in stopping the match or should the match have continued on a per payroll basis until that employee reached $7,000 for the year. Employee made well over the comp limit for 2025. I believe in practice, payroll providers are ceasing the match when the compensation reaches the limit in effect for the year but that does not provide the full match the employee is entitled to even though deferrals continued after the comp limit was reached. Would love to hear others thoughts and see if anyone has a reference since the IRS website assumes annual calculations. I am thinking that since the 401(a)(17) limit is an annual limit that the matching contributions should not have ceased.

The amount of match in a plan is limited by the max comp allowed for the year.

In a case of matching 100% of deferrals up to 2% of pay for 2025 would result in a maximum match of $7,000.  It doesn't matter what the person's YTD comp is.  You apply the match formula per period (in your example) until $7,000 is reached.  THEN it stops.

Another way to look at is is:

Say this person uniformly earned $700,000 in 2025--half thru June and the other half thru the last 6 months:  $350k per half year.  What if they didn't start deferring until July 1?  Are you not going to give them any match at all?  That's absurd.

Thanks! @BG5150 - that was my understanding as well but wanted to confirm as I believe payroll companies are handling it differently.

This issue has hung around since ERISA.  The never has been a clarification in regulations or other formal guidance.  It was included in a Q&A with the IRS that the IRS again addressed from the podium.  Here was the question and response:

"59. In a 401(k) plan, does 401(a)(17) preclude the following:

A. A earns $300,000 annually. He enrolls in 401(k) calendar year plan in August, after earning $175,000. He defers $10,000 in the balance of the year.

B. A earns $300,000 annually. He participates in a calendar year 401(k) plan making monthly deferrals of a flat dollar amount of 1/12 of $10,000 in 1998, even though his pay exceeded $160,000 before he was done making elective deferrals.

C. Same as 2, but deferrals are a percentage of pay (3.33333%).

We believe that all three scenarios should be ok. This will be discussed additionally from the podium."

That's all of the formal guidance, folks!

That having been said over a quarter century ago, and after the many, many plans that apply the limits on an annual basis have reviewed by the IRS and not found to be deficient, @401kology it is fair to say you understand correctly. 

A plan would (and could) have a provision that stops deferrals and match once a participant has YTD compensation that reaches the 401(a)(17) limit, but why would anyone except an uninformed payroll processor think this is a good idea?

Is this example permissible?

Wheelwright Inc. has 24 pay periods in 2026. The corporation’s tax year, the § 401(a) retirement plan’s plan year, the retirement plan’s limitation year, and every participant’s tax year is the calendar year. Pam’s yearly base pay is $1.2 million, so $50,000 each pay period. Pam is too young for an age-based catch-up. Pam’s § 401(k) election is 90% of each pay period’s base pay, but not to exceed, cumulatively in a year, the year’s elective-deferral limit. Pam’s January 15 § 401(k) deferral is $24,500 (only 49% of base pay). Wheelwright’s matching contribution is 100% of the participant’s elective deferral for the pay period, but not to exceed, cumulatively in a year, 7% of the year’s § 401(a)(17) compensation. With the January 15 pay, Wheelwright credits a $24,500 matching contribution. If Pam works through the whole of 2026, that matching contribution is less than 7% of Pam’s § 401(a)(17) compensation. (It's a smidge over 2% of base pay.) Pam’s year’s-worth of elective-deferral and matching contributions is exhausted with 2026’s first pay period.

Permissible if Pam works long enough to receive 7 paychecks during the year.  The comp limit for 2026 is $360,000.  Her maximum match is the lesser of 7% * 360,000 = $25,200 (calculated based on the plan match provisions) or 100% of deferrals = $24,500 (calculated based on plan deferral limit), so her maximum match is $24,500. Her maximum match limit is reached when her YTD compensation reaches 7% of $350,000 = $24,500.

If she terminates before having earned $350,000 for the year, she will have an excess match that will have to be taken away with earnings (either at the earlier of a distribution or the end of the plan year).

Note that Pam would not necessarily have to work 7 consecutive paychecks to get the maximum match.  Note further that the plan should not have explicit provisions that apply the match formula strictly on a time period that is less than a full year.

These issues would be avoided if the compensation in the match formula was not to exceed YTD compensation versus using the 401(a)(17) limit, and the plan has a true-up.  Granted, this caps the match each pay period at a lower amount, but Pam quickly gets up to the max.