Questionable interpretation of allocation formula to allow diff percentage based on years of service

[Guest DIGMYDOG]

Okay, we have a little discussion going on in the office. Can anyone help us resolve it?

The document says:

On behalf of each Participant who is eligible to share in matching contributions for the plan year, a discretionary matching contribution equal to a uniform percentage of each such Participant's deferred compensation, the exact percentage, if any, to be determined each year by the employer, which amount, if any, shall be deemed en employer non-elective contribution.

This is how we are supposed to allocate it:

Participants with less than five years of service will get 100% of the first $300.00 of deferral, while participants with five years or more of service will get 100% of first $500.00 of deferral.

I can't see how this allocation method complies with the doc.. It doesn't seem to me that it is "equal to a uniform percentage of each such participan'ts deferred compensation".

Am I missing something here? Can anyone out there help me understand this?

Thanks!

[RCK]

I agree with you. The "exact percentage" can vary by year of plan operation--not by year of participant service. In addition, I don't see that the document gives you the latitude to apply one percentage below $XXX of deferral and a different percentage above that level. It says "uniform percentage of such participant's deferred compensation", which means to me a uniform percentage of all deferrals.

As usual, I'm assuming that there is not any wording elsewhere in the document that might lead one to a different opinion.

RCK

[WDIK]

This is how we are supposed to allocate it:

It is supposed to be allocated based on the language in the plan document.

[Guest DIGMYDOG]

By "supposed to allocate", I mean we have a corporate resolution that specifies this type of allocation.

The other person's argument is that we are using a percentage of deferred compensation (100% of first $300.00 or $500.00) and therefore complying with the document. I just do not see it that way as we are using years of service as well.

We have one part that deferred 3900 and has 5 yrs of service, therefore he gets $500.00, while another participant that deferred $2600 with 5 years of service, therefore he gets $500.00. Their respective percentage of match to deferred comp are 12.82%, and 19.23%. Seems to me that both should either be 12.82% OR 19.23%...right? ( There's one person that got 32.05% and another that got 11.54%.)

There is nothing in the doc that says anything about using years of service for determining the match amount. We do not have a HCE discrim problem as there are no HCEs...at least for this year. Still, I don't think the allocation should be based on years of service...

If the client wanted it this way, could we amend the plan to set up different groups based on years of service? Would this be possible?

Thanks for any help...