BG5150 Posted June 30, 2021 Share Posted June 30, 2021 Could a sponsor add a match that varies with compensation? Something like: Comp $1 to $30,000 match 100% deferrals Comp $30,001 to $50,000 match 80% of deferrals $50k to $100k 70% match $100k+ 50% match And maybe cap some of the higher tiers, like 70% of deferrals up to max match of $10,000. QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left. Link to comment Share on other sites More sharing options...
BG5150 Posted June 30, 2021 Author Share Posted June 30, 2021 The sponsor is trying to get the lower paid employees more 'equity' in the plan. It's a 403(b) plan. 400 actives. Toying with a new comp allocation that gives lower paid people bigger percentages. I doubt we would have problems with the testing that way. QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left. Link to comment Share on other sites More sharing options...
Lou S. Posted June 30, 2021 Share Posted June 30, 2021 As long as you can write it into a document and administer it, it looks like it would be non-discriminatory. Unless you had a lot of low paid 5% owners but doesn't sound like that would be an issue in a 400 life 403(b). Luke Bailey 1 Link to comment Share on other sites More sharing options...
WCC Posted June 30, 2021 Share Posted June 30, 2021 Here is a similar discussion if it is helpful. Bill Presson and Luke Bailey 2 Link to comment Share on other sites More sharing options...
BG5150 Posted June 30, 2021 Author Share Posted June 30, 2021 Thanks, WCC. I even chimed in on that brief discussion. Looks like its doable. I just need to see if my document will support it. QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left. Link to comment Share on other sites More sharing options...
Patricia Neal Jensen Posted July 6, 2021 Share Posted July 6, 2021 Yes, you can. It may have to be tested but as has been previously pointed out, it will probably pass. As for your document, it may support it being written into the document. You could also explore naming the classes in the document and then having the document indicate that the match formula itself is discretionary and then writing the details into a Board Resolution. The issue you may face with a 403(b) is that almost everyone will be eligible for deferrals but may not sign up to make them. One can have a lot of nondeferring participants in a 403(b) and if they don't defer, they won't receive matching and, consequently, will be "0's" in testing. I would explore using a waiting period for the matching. It may give you a better result as the plan sponsor will be then less likely to end up with a lot of newly hired low paid individuals who are not deferring. Most documents today permit a "bifurcated" eligibility in 403(b) (Immediate for deferral but a service requirement, like a year wait, to be eligible for matching) . Finally, I would not count on lower paid (or any!) employees figuring this out for themselves. An advisor or someone good in HR should focus on communicating with low paid workers whenever they become eligible for matching. Have meetings; show illustrations, etc. Good luck! Looks like the sponsor is trying to do a good thing. PNJ Patricia Neal Jensen, JD Vice President and Nonprofit Practice Leader |Future Plan, an Ascensus Company 21031 Ventura Blvd., 12th Floor Woodland Hills, CA 91364 E patricia.jensen@futureplan.com P 949-325-6727 Link to comment Share on other sites More sharing options...
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