Interesting. Is this part of your annual bonus, or did this number just come out of the blue?

My first thought (the cynic in me) is wondering if this is your company's way of clearing the 401k non-discrimination test, in lieu of refunding contributions made by highly compensated employees. I am not an HR person, but remember reading about this a while back.

Highly Compensated Employee Rules Aim to Make 401k's Fair

quote:
The test requires that employees be split into two groups: highly compensated and nonhighly compensated. For the 2012 tax year, highly compensated employees are those who earned more than $115,000, or owned more than 5 percent of the business. (The compensation limit is based on the previous year's compensation, while the ownership limit is based on the previous or current year.) You are considered highly compensated in 2012 if you earned more than $115,000 in 2011.

The test is as follows: the average contributions of highly compensated employees, as a group, cannot exceed the average contributions of nonhighly compensated employees, as a group, by more than about 2 percent. (Age-50 catch-up contributions are not included in discrimination testing.) If the HCEs exceed this threshold and the employer fails to correct the imbalance, the plan could lose its tax-qualified status and all contributions and earnings would have to be distributed to all plan participants. In addition to the 2 percent spread, the contributions of all HCEs as a group may not be more than two times the percentage of other employees' contributions.

10 Steps If Your 401(k) Plan Fails Nondiscrimination Testing

quote:
3. Consider making a qualified non-elective contribution (QNEC) or qualified matching contribution (QMAC). If cutting back the highly compensated employees' contributions is highly unpalatable, there are other options. A QNEC is an employer contribution that is made to the plan on behalf of every eligible employee, whether or not he or she contributes to the plan. A QMAC is an employer matching contribution that is allocated only to those employees who defer. The employer would need to contribute enough money to make the plan pass the nondiscrimination test. Most employers do not take these approaches because doing so is expensive and because the employer contributions are 100 percent vested immediately.