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Try looking at it this way: any participant whose match is limited by 401(a)(17) will receive at least the missed match amount in cash. Not limited by 401(a)(17)? No bonus. Didn't make a contribution? No match was missed, so no bonus. Made a contribution and it was limited by 401(a)(17)? Get a cash bonus based on a formula, not based on the missed amount. The argument is probably stronger if instead of using a flat formula to calculate the bonus that the amount of the missed match is actually calculated per individual, which still gives zero for those not making a contribution. As an aside, since this is a cash bonus and not an NQ plan, I don't see 409A or 1.401(k)-1(e)(6)(iii)/(iv) applying, provided is it paid by March 15 of the following year.

It has been a while since I looked at this. On the 401(k) side, this is clearly a violation of the contingent benefit rule. I seem to recall that if the nonqualified plan contribution is contingent on the executive deferring the 402(g) max, that is one exception available for the contingent benefit rule. I don't remember a cite for that. As for the 409A regs, the preamble states the following: Commentators raised issues concerning other types of plans under which a service provider must participate in a qualified plan to receive nonqualified deferred compensation. Specifically, commentators asked whether a plan could comply with section 409A if it provided that an employee must defer the maximum amount permissible under a qualified plan in order to defer any amount under a nonqualified deferred compensation plan. Where the service provider can change the service provider’s election to defer the maximum amount permissible under the qualified plan during the taxable year, and thereby change or discontinue deferrals under a nonqualified deferred compensation plan, the service provider can effectively make a late election to defer (or not defer) amounts under the nonqualified plan. The final regulations generally do not provide any additional relief with respect to this type of plan. However, where the additional amounts deferred under the nonqualified deferred compensation plan reflect only matching contributions that would be available under the qualified plan absent the restrictions in the qualified plan intended to reflect limits on qualified plan contributions under sections 401(m) and 401(a)(17), the final regulations provide relief but solely with respect to the matching amount that could have been contributed to the qualified plan absent such limits. I added the emphasis. If I recall the issue, if the match is not a perfect match, and if the arrangement is subject to 409A, this also raises 409A issues because the participant can be said to have made a late election on the nonqualified deferral by changing the elective deferrals in the qualified plan.