401K Limits in the year you turn 50 - Company side

[BulldogTom]

I know that in the year you turn 50, you are allowed to defer the catch up amount, so long as you are 50 by the end of the year.

At my day job, I am planning to go in and update the limits on everybody that turns 50 in 2017.  My 401K TPA says that is not a good idea because if they leave employment with us before they turn 50, and they are over 18K in deferrals, we would have to return any amounts in excess.  This does not sound correct to me.

Any of you familiar with this provision.  It sounds stupid to me, but then there are a lot of government rules that sound stupid to me.

Thanks for any assistance.

Tom
Newark, CA

[FDNY]

I can't cite any authority on this but the way I understand it if the participant contributes the catch up in the year he or she turns 50 then they are fine whether they are employed by the employer or leave employment by the end of the year.   Then again, like you say, many government rules are stupid.