Discretionary Match

[Randy Watson]

When does an employer have to decide whether it will make a discretionary matching contribution? I know when the match has to be made to get the deduction, but does the employer have to adopt an amendment or have a board resolution that provides for the match by the end of the plan year to which the match applies?

[JanetM]

Wouldn't it be like discretionary PS contributions? Those are usually calculated after the end of the year and communicated to participants.

[Randy Watson]

I believe profit sharing plans are required to have a definite pre-determined formula, so the only decision that has to be made is whether to make a contribution and how much. With a discretionary matching contribution, I don't believe any formula is set forth in the plan...at least not in any of the plans I have seen. I guess my question is whether this pre-determined formula requirement applies to matching contributions, which would seem to require an amendment by the end of the year.

[JanetM]

I think it is the same as PS as long as you have the basic part in place. Example - PS is % of Comp. the % is finalized after year end. The Match would be $ on a % of deferral. Am thinking as long as you have been telling folks the % of deferral that will be matched - the amount of match can be decided later.

[Bird]

A formula has to be in the plan for purposes of allocating a discretionary matching contribution. It might be straight pro-rata, or pro-rata of the first "x" percent, but it has to be in there otherwise benefits are not definitely determinable.

The discretion is over how much, not how it is allocated.

[JanetM]

Well in Randy's case that means that the plan says it will match the first 6% of deferrals. It doesn't have to say what the amount of match is.