Increasing Tiered Matches

[Guest JimmyG]

I am talking to a prospect that currently has a tiered match of 25¢ on the $1 to 4% and a $1 / $1 match from 4-6%. I seems like in my studies a few years ago, I remember something about a test on how much the matches can increase over prior levels, and it seems like this wouldn't pass. (Each time I search anywhere like CCH, I get that SH Enhanced Matching formulas cannot allow for a tiered match that increases at all, but this plan is not a SH. I also see discussions of matches being tiered based on things such as years of service and how you'd have to test them for Benefits Rights & Features, but again this plan doesn't do this.) I've looked through the Pension Answer Book, 401(k) Answer Book, Coverage & Non-Discrimination Answer Book and others, but am only finding discussions of the above.

Anyway, I've found on a few sites that increasing tiered matches aren't allowed in Prototype plans (at least Standardized), but with no references. I also e-mailed someone at Corbel and he said that he seems to remember the same type of rule but can't find it either, but also said that you cannot use their prototype to do it.

So, my question is: Am I losing my mind and there never was such a rule? If there was, is it now gone? If there is and it is still in effect, where would I find it??

[WDIK]

Does this old thread offer any assistance?

[Guest JimmyG]

Does this old thread offer any assistance?

Thanks for the assistance. It does tell me that other pension practitioners don't seem to be talking about it in similar discussions, so maybe I did just dream it.

It seems like the test that I vaguely remember was something like you couldn't have a matching rate that was more than (something like) 125% of the matching rate of the tier (or tiers) that came before it. So, if you were matching 50¢ for $1 to 4%, you could then go 60¢ for $1 from 4-6%, but you couldn't go up to a $1 for $1 match, since that would be more than 125% of the 50¢.

[Tom Poje]

never heard of anything that limits how much you can limit a tiered match to.

what you might be thinking of is for the minimum allocation gateway, if you have several tiers the ratio of one band to the immediately preceding band (if not greater than other previous bands) avoids having to provide the gateway 5% or 1/3 of the HCE. examples in the regs are found in 1.401(a)(4)-8(b)(1)(viii). but that is nonelective contributions only, not match.

standardized plans are 'gauranteed' of always passing all testing. that is why you can't have a tiered formula in them.

[RCK]

JimmyG, are you confusing this issue with the Defined Benefit 133 1/3 % accrual rule that prevents excessive backloading of accruals -- 411(b)?

RCK