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February 23, 2009

Excess aggregate contribution

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Definition

With respect to any plan year, the excess of —

  • the aggregate amount of the matching contributions and employee contributions (and any qualified nonelective contribution or elective contribution taken into account in computing the contribution percentage) actually made on behalf of highly compensated employees for such plan year, over…
  • the maximum amount of such contributions permitted under the contribution percentage requirement (determined by reducing contributions made on behalf of highly compensated employees in order of their contribution percentages beginning with the highest of such percentages).

Referring Cite

IRC. §401(m)(6)(B); Treas. Reg. §1.401(m)-2

Additional Helpful Information

A plan may correct an excess aggregate contribution by either of the following methods:

    • Additional contributions. –The employer makes additional contributions that are taken into account for the ACP test , that in combination with the other contributions taken into account , allow the plan to satisfy the ACP test
    • Excess aggregate contributions distributed or forfeited. –Excess aggregate contributions are distributed or forfeited in accordance with the Code.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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