Confusion over matching contributions on payroll basis.

[Guest IanHanson]

Brief history: I entered my safe harbor tiered matching contribution plan on July 1st. As the company president, various notices and the Plan Summary Document said match was based on calendar year gross, I set my contributions at 11% to catch up for the half year without contributions. After finally reviewing the actual Plan Document I was set straight when it stated that the compensation calculation amount was pay after entering the plan -- my pay since July 1.

Due to the confusion/obfuscation I have already contributed well over 5% of the eligible compensation I will recieve by the end of the plan year. I now want to discontinue my payroll deferrals and continue to recieve employer matching contributions. I was told that if I do so, matching contributions will stop because the plan-specified "payroll basis" for matching contributions will match only the zero dollars contributed per two weeks regardless of my previous deferrals since July 1.

When I read the Plan Document this claim appears bogus, but I am no expert.

I would like to know who has it right, me or my employer. If I am right, I'd like to know how to explain why I'm right. For example if there's a line from the tax code I can quote, or an explanation of ADP/ACP that would be relevant.

I appreciate any help I can get.

-Ian

[RCK]

Plans can be written either way (the ones that I work with operate the way that yours seems to). It's going to depend on what exactly the Plan document and the Summary Plan Description say, and to a lesser extent, any other written documentation that you have.

I'm not sure if the fact that you are dealing with a safe harbor plan matters or not--maybe someone else can help there.

If nothing else, review the SPD's claim for benefits section, and file a claim for benefits.

RCK

[Archimage]

Your plan document will state how matching contributions are to be allocated. You may just have to look a little harder and maybe ask the person who says this is the case. It is an allowable method to match on a payroll-by-payroll basis.

[Bird]

I agree with the other comments; you'll have to read the document very carefully. And yes, a plan may match on a payroll basis. I will add that in my experience, it is not at all unusual for a payroll company, or plan sponsor, to assume that matching is done on a payroll basis, whether or not that assumption is correct.

[Archimage]

It is also possible that the match is done on a payroll by payroll basis and a true-up contribution is done at the end of the year. Again, all of this should be addressed in the doc.