Payroll Based Match

[Guest jusducki]

Curious how any of you handle this situation....discretionary match, payroll based using 50% up to 6% of compensation, no true-ups required per document...employee earns $25,000/month in first quarter and defers $5000 per month, maxing out deferral. Employer matches 50% up to 6% per month, therefore giving employee $750 Match per month, for a total of $2250. Employee can no longer defer as has reached max but continues to earn $25,000/month.

In this situation, based on your experiences, how does employer handle it so employee receives the full Match due ($6600)? Is payroll system set up to look at compensation annually (recognizing this employee makes well above the $220,000compensation limit) so giving $2200 per month for match during the three months employee is deferring? Doing this, however, creates a problem if employee terminates, for eg. in the fifth month. Or, do employers with this situation manually watch match system? Seems like a ton of work. Or, do employers notify employees that if they defer heavily in first few months (as in my example), they risk not getting full match they're entitled to due to payroll system having Match formula based on monthly earnings.

Thanks in advance for any assistance you can give me.

[JanetM]

We tell HCEs that if they max out early they won't get the full match. If you match on each payroll without annual true up the HCE won't get full matching amount. The only way I see to fix it so they get the max is to add the true up.

[Guest Boilerburm1]

Same here. The document requirements must be followed, so a payroll match can't be adjusted because someone makes and defers too much too soon. We advise that they should smooth out the deferrals to maximize the match.