Guest jetfaninmn Posted May 9, 2006 Posted May 9, 2006 A client of mine is looking to increase plan participation. He has a bonus at the end of each year that he would now like to divide up between all employees who are contributiong to the plan. It would be a flat dollar amount accross the board and no HCE's would receive this. The plan allows for discretionary match contributions. Anyone see any issues with this?
Tom Poje Posted May 9, 2006 Posted May 9, 2006 you still have to follow terms of the document. the plan may call for a discretionary match, but if HCEs are not excluded then you still have to give them the match as well. in addition, if by flat dollar amount you mean that each particiapnt gets the same amount, then again, the document has to be specific. most allocate based on deferral.
david rigby Posted May 9, 2006 Posted May 9, 2006 This might help some, but I doubt it will increase participation. You need advance encouragement for that. How about a safe harbor match? I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
ERISAnut Posted May 10, 2006 Posted May 10, 2006 If your client is adamant about increasing plan participation for the reason of a failed ADP test, then he may exploit that option and allocation this Matching Contribution as a QMAC. As mentioned by the others, you should verify the language in the document regarding the allocation of QMAC's. If the term "flat dollar of percentage" is used, then you are home free. It helps to try the document FIRST to look for options.
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