Limit on discretionary match

[Disco Stu]

I'm wondering if it is possible to have a discretionary matching contribution in a prototype plan where the cap on the match is also disrectionary from year to year. For example, one year the employer could choose to match a certain percentage on the first 6% of salary deferred and then only match the first 4% next year.

Thanks for any input.

[Medusa]

I am looking at a nonstandardized Fidelity prototype right now that has this option to be checked off on the Adoption Agreement:

Discretionary Matching Employer Contribution - The Employer may make a basic Matching Employer Contribution on behalf of each Participant in an amount equal to the percentage declared for the year, if any, by a Board of Directors' Resolution. The Board of Directors' Resolution may limit the Deferral Contributions matched to a specified dollar amount or percentage of Compensation.

[rcline46]

It certainly can be do with a resolution. However you must first see what the eligibility to receive a match is - is it EOY, 1000 hours; 500 hours; eligible to defer?

Next, is the resolution evergreen or self limiting? That is does it say 'for 1999 only' or just state the match amount?

The problem is when the match is accrued! To avoid problems either the resolution must be done before the first of the plan year, or before any match is accrued which means Dec 30 if EOY 1000 hours is used. Otherwise you will have two different match rates during the year quite possibly unintentionally.