Mandatory Roth / Plans where HCE's hit 415 Limit

I get it, if a "Highly Paid Individual" goes over the 415 limit but NOT the 402g limit, their catch-ups need to be coded as Roth. 

1) What happens if the discretionary profit sharing that puts them over is deposited after the end of the year? Is the only option the Roth conversion correction?

2) Does anyone have any ideas for how to handle a plan that is contributing 15% of pay throughout the year, where they will hit the 415 limit during the year well before they hit 402(g)?

I almost wonder if we should tell these Highly Paid Individuals to contribute $7,500 of Roth first to avoid any issues.  These seems like it's going to be a real challenge for some plans.  Obviously it is few and far between, but when it applies I think its going to be a pain. Curious if others have any grand ideas.

I think this section of the proposed regs ius pretty relevant because I believe it must be followed to use the "in plan roth conversion" correction method? 1.414(v)-2(c)(3)(i).

(3) General correction requirements —(i) Practices and procedures. For a plan to be eligible to use either of the correction methods described under paragraph (c)(2) of this section with respect to an elective deferral that is a catch-up contribution because it exceeds a statutory limit described in § 1.414(v)-1(b)(1)(i), the plan sponsor or plan administrator must have in place practices and procedures designed to result in compliance with section 414(v)(7) at the time the elective deferral is made. As part of these practices and procedures, the plan must provide that the elective deferrals of a participant who is subject to the Roth catch-up requirement under paragraph (a)(2) of this section, but who has not made an affirmative election to make catch-up contributions as designated Roth contributions nor made designated Roth contributions equal to the applicable dollar catch-up limit earlier in a calendar year, are automatically treated as designated Roth contributions after the participant's pre-tax elective deferrals made during the calendar year equal the section 401(a)(30) limit on elective deferrals for the taxable year that begins in the calendar year. Similarly, the elective deferrals of such a participant who has not made an affirmative election to make catch-up contributions as designated Roth contributions nor made designated Roth contributions equal to the applicable dollar catch-up limit earlier in the limitation year must be automatically treated as designated Roth contributions after the participant's pre-tax elective deferrals result in the participant's annual additions for the limitation year exceeding the section 415(c) limit for the limitation year.

My guess is that there will be some mechanism to fix this, such as a required in-plan conversion of the excess plus earning being converted to ROTH after the fact or a refund like is currently done with a failed test with the Plan issuing a 1099-R, either as an IRS policy or an EPCRS self-correction.

But I don't write the rules so this isn't legal advice. Just what appears to be a likely fix for a problem that as you say won't come up often but does need a solution once someone like ASPPA brings it up to someone in congress.

you would have thought but it's not in the proposed regs I don't think.  In fact the Employer has to have some "policy or procedure" in place to prevent this before it can use the in-plan Rth conversion correction method.  I can't think of anything practical to do that.

The final rule was published September 16. The rule would become effective November 17.

Whatever the Treasury might have said now has been said (or omitted).

https://www.govinfo.gov/content/pkg/FR-2025-09-16/pdf/2025-17865.pdf

There are differences between the proposed and final rules.

The rule applies “with respect to contributions in taxable years beginning after December 31, 2026. However, see §§ 1.401(k)–1(f)(5)(iii), 1.414(v)–1(i)(2), and 1.414(v)–2(e)(2) and the Applicability Dates section later in [the final rulemaking’s] preamble for additional details regarding applicability dates.”

“Prior to the applicability date of the final regulations, a reasonable, good[-]faith interpretation standard applies with respect to the statutory provisions reflected in the final regulations.”

Some administrators might find it simpler to start the “practices and procedures” the final rule calls for with January 1, 2026.