Is this 401(k) match discriminatory?

[Guest jc1457]

My client has a match formula where they match 100% up to 2% of comp after you've completed 2 years of service. When you've completed 3 years of service, the match formula jumps to 100% of deferrals up to 3% of comp.

It passes the ACP Test. Still, is this match formula allowable???

Thank you!

[four01kman]

My take is it still needs to meet the benefits, rights and features test of 401(a)(4) and 410. If only HCE are around 3+ years and no non-HCE ever reaches the 3rd year, it may be treated as a discriminatory match.

[austin3515]

i.e., each tier of match must pass the "nondiscriminatory classication" test as a "Benefit, Right or Feature." There's probably a little more to it then I have outlined here, so definitely do some research on that before blessing the design.