I have a potential client who sent me an illustration from a competitor. They called the plan design a "Multiple Match401(k) Program. I have seen many illustrations over the years but none quite like this. The plan is set up as a profit sharing plan with the safe harbor match provision. Then, on top of the 4% match they allocate a 100% match titled "Fixed Required Match". The next allocation is titled "Optional 4% Match" where they allocate an additional 4%. Under this scenario the client ends up with a deferral of $16,500 and a match of $32,500.
The claim (according to the potential client) is that since the additional matching amounts are based on the original safe harbor match then the whole matching contribution amount is not subject to testing. I see both a failure to provide Top Heavy minimums since the plan is providing more than the 4% safe harbor match along with a failure of the ACP test.
Has anyone heard of any such loophole in the regs?
