Some plans try to avoid failing non-discrimination tests by slapping on contribution limits for HCEs. Along those lines, some employers test their plans regularly through the year. If they find HCE contributions are getting too high, they impose contribution limits immediately. When you reach the critical point, the HCEs are cut off. The option that is used most rarely is for the employer to make contributions to lower-paid employees' accounts to raise their percentage contributions.
Employers can also decide to make employees wait longer to become eligible to join the plan.
Typically, workers with a longer time on the job have higher participation rates in employer-sponsored retirement plans. So the thought is that by lengthening the eligibility period, the plan will have higher participation levels and it won't fail the non-discrimination tests. The government allows a maximum waiting period of one year. Over the long term, a good way to fix a contribution imbalance is to encourage wider participation by lower-paid workers in the plan. Sometimes boosting education about the plan is all it takes, Kravchick says.