Match Calculated Per Pay Basis - Safe Harbor

Safe harbor match formula is 100% on the 1st 3% and 50% on the next 2%

Match is calculated on a per pay basis

Participants elective withholding is 5%

Total Compensation is $286000

Retirement plan software matched participant 4% of each pay based on the match formula for a total of $11440 for the year

But isn't the max match permitted for this person $10800 which is 4% of $270000

Pretty sure I need to forfeit $640 of match since participant was matched on wages over $270k, but the per pay basis for allocating the match is throwing me off

Any thoughts on this would be welcome...  Thanks

my thoughts  are a wish Clemson will win even if I am in the minority....oh, by 'any thoughts' you don't really mean 'any'

yes, there was a failure to limit compensation and need to forfeit the overage

1 hour ago, Tom Poje said:

my thoughts  are a wish Clemson will win even if I am in the minority....oh, by 'any thoughts' you don't really mean 'any'

 

yes, there was a failure to limit compensation and need to forfeit the overage

Oddly, my thought were like Tom's.  Not sure if that is a good thing or bad thing.  But my first thoughts were Rick is dead need to put Daryl picture as an avatar.  But I didn't give in to that temptation.  

But now that Tom started the silliness and answered the question......?

Don't forget 2018 is 275,000 annual compensation limit.  11,000 basic safe harbor match.

Not sure if you were really talking 2017....  I don't want you fixing the wrong amount.

Best way to deal with this issue is to have the maximum match defined for the year applied as a cap to YTD matching.  Most payroll systems can do this, since they just need to keep a running total of YTD match.  Then, the period match is the lesser of your formula applied to payroll period pay/deferral versus the cap minus YTD match.

21 hours ago, Below Ground said:

Best way to deal with this issue is to have the maximum match defined for the year applied as a cap to YTD matching.  Most payroll systems can do this, since they just need to keep a running total of YTD match.  Then, the period match is the lesser of your formula applied to payroll period pay/deferral versus the cap minus YTD match.

That doesn't work for someone deferring less than 5% in the OP's situation.   If you only add a maximum $ amount for the match, a person making $286,000 and deferring 4% would still have a match based on compensation in excess of the 401(a)(17) limit.  The current calculation method would yield a match of $10,010 for 2018 ($286,000 * .035), which doesn't exceed the maximum possible match for 2018 of $11,000. But, the $10,010 is calculated using compensation in excess of $275,000.

I have found that reconciling annual limits to values computed with per-payroll pay to be somewhat problematic, especially if the Plan defines the basis to be the payroll period.  Better to fund on a periodic basis with actual allocation based upon the annual basis.  Does that mean you won't have situations where monies needs to "forfeited"?  No.  As you point out, a dollar cap doesn't give a perfect solution, but it typically works for many, if not most, plans.