FAQ 674: 415--Order of contribution return


I have a plan where two participants went over the 415 limit. For example, they received a $35,000.00 profit sharing contribution, made a $20,000.00 employee contribution (over 50 years old) and received a safe harbor match contribution of $8,800.00. The system is telling me to return $18,000.00 out of the employee source but nothing out of the safe harbor match source. Is this correct? I thought since it is a safe harbor match that we would need to return some or all of this money as well. Is there something I need to do in ASC to reflect this?


You can code the order of excess contribution reduction on the 415c compliance test screen setup. It defaults to "Sequential", which means the calculation will return as many dollars as it can from the first source listed in the "Source Reduction Order" box. You can change the order of source reduction by dragging and dropping source names to the top of the list. If you want the system to take money proportionally out of more than one source, choose "Proportional" and it will take excess contributions from each of the sources listed in the "Source Reduction Order" box.

Because you have several excesses in this plan, the order of tests is very important. Before you do 402(g), Plan Limits, 415 or ADP, you should run Reports-Compliance-Backup or Restore Contributions so that you can restore the original amounts if you want to rerun the tests. After backing up contributions, run the 402(g) test first and be sure to check the box that says "Save Calculated Changes" so that the catchup amounts are correctly reflected when you get to the 415 test. If you have document-imposed plan limits, you would run this test next. If not, you can move on to 415 and then to ADP.