Matching Contribution From Employee Compensation

[Randy Watson]

Can someone tell me whether an employer can make matching contributions from an employee's compensation? Here are the facts:

Employees are permitted to make elective deferrals under the plan. There is a discretionary matching contribution and the source of the match is the employees' compensation (pre tax). The employees earn a salary and a % of gross revenues as their compensation. If the match is not made, the employer simply pays those amounts to the employee as compensation.

This is how the employer was operating before we got involved, so we are not sure what authority they are relying on. Would this situation change at all if the employees were owners of a partnership?

[Mike Preston]

Somewhat confusing. It sounds like you don't have a match. You have an "additional" deferral where the "allowable" additional deferral is dependent upon the first deferral. This, no doubt, results in a non-qualified CODA (this is usually a bad thing) because I can't imagine that it isn't a violation of the contingent benefit rule.