True-up for Partners in a Safe Harbor Plan

[Guest ERISAcatNraleigh]

I have a client (a partnership) with a safe harbor 401(k) plan. The plan matches deferrals on a per pay-period basis. For partners, the plan matches deferrals for each partner's monthly draw. Also, for partners but not for non-partners, the plan trues-up the match at year end. Does this last bit of information violate the safe harbor rules?

[RCK]

What do you mean by "the plan trues up the match at year end"?

RCK

[Guest ERISAcatNraleigh]

The plan matches 100% of the first 6% of compensation. Thus, if a partner defers less than 6% for at least one pay period (even though the partner defers more than 6% for the plan year), because the match is applied on a per pay period basis the partner will not receive the maximum potential match for the plan year. Taking into account the partner's year end income distribution, the partner's match is "trued-up" to equal 6% of the partner's compensation for the plan year (assuming he deferred at least 6%). A non-partner who defers less than 6% for at least one pay period does not have his match trued-up to equal 6% of plan year compensation, even if the non-partner defers at least 6% of plan year comp.

[Mike Preston]

Seems like a clear Benefits, Rights and Feature violation.

[RCK]

I agree with Mike Preston.

Does the plan say that you're going to do it like that?

RCK