Safe harbor true-up

[Guest JBeck]

A safe harbor plan provides for a true-up of the match at the end of each year. The employer would like to true-up only for the employees who are employed on the last day of the year. Is this doable? Does this approach violate the requirement that an HCE's rate of match cannot be greater than a nonHCEs rate of match? Some HCEs will obviously get the true-up while some HCEs who terminated will not.

Put another way, does the plan comply with Code section 401(m)(1)(B)(iii) that provides that the matching contribution with respect to any highly compensated employee at any rate of elective deferrals can not be greater than that with respect to any employee who is not a highly compensated employee.

[Guest Mbrockway]

Is it a SHMAT? When does the plan allow for it to be allocated? Per pay period, annually??

[Blinky the 3-eyed Fish]

Does this approach violate the requirement that an HCE's rate of match cannot be greater than a nonHCEs rate of match?

It would if only HCE's got the true-up, but otherwise it's a BRF issue subject to nondiscrimination testing.

But the main issue is what does your document say? I am betting there are no provisions discussing this scenario.