Discretionary deposits in 401K to make up for missed match

My employer has a 401K that does not have a "true up" clause.  This was a huge surprise to me and I discovered this when they were withholding too much money for my 401K and I hit the federal limit 3 months before the end of the year.  I thus was informed that I was no longer eligible for the employer match because I wasn't contributing to the 401K anymore since I'd maxed out the federal limit.  

Because the larger-than-expected withholding was due to a mistake made by the accounting department, I asked if they could just use the option in the 401K to make a discretionary deposit to provide the missed matching in the form of a bonus, but I was told it was somehow "illegal" to do that without any explanation.  My plan provider says they are within their legal options to provide me, and only me, a bonus to cover the difference and they have many avenues in which to justify it. 

The plan is a safe harbor plan and I am a HCE.  I'm getting conflicting information from everything I've read and my plan provider.  What are my options here?  It appears my company is dragging their feet to run out the clock so they can claim there is nothing they can do about the problem.  My understanding is even as an HCE under a safe harbor plan, they could give me a bonus so long as the total did not exceed 4% of my income.  Am I correct here?

Any thoughts on this?  I'm not an accountant nor am I a benefits specialist and I would love some help understanding all of this.

I'll take a stab at it for the sake of conversation...

If it was truly a mistake on the end of the accounting department, then the plan doesn't have a problem.  In other words all of the calcs done and contributions made were accurate.  The fact that the matching contributions to the plan were less than they could/would otherwise have been is not a plan problem, it's an issue between you and the company.  There might be a couple of ways to fix it:

First I'd be surprised if they didn't want to fix it, because if it had been done right in the first place they would have made the (additional) matching contributions and we wouldn't be having this conversation.  But that is an option for them (not fixing it) and essentially forcing you to sue them for mishandling payroll or you otherwise getting pissed and leaving or whatever.

They could give you a bonus (not in the plan but as additional comp) and gross it up to cover the taxes.  That would cost them the most money.

They might be able to make an additional "nonelective" (aka "profit sharing") contribution.  That would be subject to plan provisions, and also non-discrimination testing since you are an HCE.  But if no one at all is getting this, I don't see how it could work on the non-discrimination side.

Finally they might be able to just make the additional deposit as a match...it might involve some trickery on the payroll end, and frankly it would require the recordkeeper and/or third party administrator if you have one, either not recognizing it or looking the other way.  In other words it's not right at all and while logically these two wrongs do make a right, now you/they are exposing the plan to some risk by not following the terms of the document, and doing so in a discriminatory manner to boot.  

17 hours ago, PGWilliams said:

This was a huge surprise to me and I discovered this when they were withholding too much money for my 401K and I hit the federal limit 3 months before the end of the year.

Not to be unsympathetic, but you certainly bear some responsibility here by not recognizing that the salary deferrals that were withheld from your pay were not in accordance with your election, if that indeed was the case. It still boggles my mind to hear stories on how various over or under adjustments to someone's pay go unnoticed for extended periods of time. If your salary deferrals maxed out 3 months earlier than planned (i.e., September rather than December), that is a 33% error (if truly an error) - how does that go unnoticed, presumably for the entire year and be a "big surprise"? I would sure notice a withholding error of that magnitude in my pay, regardless of how much or how little I made.

If this was not the surprise, and you wanted the accelerated deposits, but were surprised by the lack of a true-up, then you either failed to read the annual safe harbor notice and/or SPD as applicable or your employer failed to properly provide those to you or their narrative was deficient, in which case (and the only case in my opinion) you may have a beef with your employer.

Good luck.

I think you may need your election form to show  that your employer was withholding the wrong amount or there is very likely no correction to be made as they are simply following the terms of the Plan. If you elected to contribute too much per pay period such that you hit the annual limit early and the Plan has a per payroll match, you may simply be out of luck for the remaining 2019 match.

As for giving you and only you an additional match, probably not under the terms of the plan document.