FAQ 127: ADP--Catchup in ADP not calculated for HCE without refund

Problem: I have a 401(k) plan that fails. I would have thought that the main HCE particpant would be listed on the Summary of Catchup Contributions page and that his catch-up contribution which he did not make would be recharacterized and used to offset the amount of refund due. The ADP refund is small, and the catch-up would use it up if applied to him. I wasn't sure if the reason there is no catch-up applied is because he is not getting a refund.

Solution: Yes, you are correct. The catchup can only be used for those that are actually getting a refund. It is confusing because of how the regulations calculate the total to be returned using the old percentage leveling method, but then apply that total to individual HCEs using the newer dollar leveling method.