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Salary deferrals can only be made from Section 415(c) compensation. See 1.401(k)-1(e)(8). For the self-employed, 415(c) compensation is earned income. See 1.415(c)-2(b) (2). If the client doesn't have any earned income, there can't be any deferrals.

I would ask the document provider to weigh in. Some documents are purposely vague and allow a wide window of interpretation. I am not comfortable allocating different rates of match on a discretionary basis. To me, "discretionary match" means it will be made year to year at the Employer's discretion, and that the formula each year is also at the discretion of the ER. But it's either a uniform match or tiered. Not a grouping method similar to profit sharing.