Client erroneously informed ee’s of discontinuation of match

[Guest Powers]

Four months into the plan year, my client stopped the matching contributions to their plan. They notified the participants, but failed to contact us so no amendment was drafted or executed. I notified the client that they would still have to make the contribution (matching formula in document). What is concerning me is that after the client notified the participants that there would not be a match, several participants stopped their deferral contributions. Notwithstanding the employee relations nightmare, what possible issues/problems can arise?

Thanx!

[Spencer]

so your concern is that the employees who stopped deferring because they thought there was no match will come back and cry foul when the match is allocated?

I'm sure there will be some grumbling, but I think you are fine. Allocating the match is in compliance with the doc and favors the employees.

[GBurns]

What happens if the employees who stopped deferrals now want back in but increase their deferrals so as to "catch up"? Would the match on the "increased" deferrals restore these employees by the end of the year to where they would have been if they had not stopped (interest and other investment earnings not counted).

The employer match could/should end up the same at the end of the year, anyhow.

It might be a PR wash if the deferrals that were not stopped would have been invested in a fund etc that would have lost their money.