401(k) Safe Harbors Match w/ an additional forfeitable match

[Guest RMassa]

I am having trouble interpreting Notice 98-52 in regards to offering a forfeitable match in addition to the safe harbor basic or enhanced match formula.

If you are using one of the safe harbor match formulas, can you also offer a forfeitable matching formula of up 6% of comp (up to 4% for discretionary match)that is over and above the amount of the safe harbor match? Or, are the two considered to be cumulative to a total amount of only 6% of comp?

Also, my firm's attorney is taking the position that, if you use the safe harbor non-elective contribution, then you are still restricted to the 6% matching compensation limit because the non-elective contribution is assumed to satisfy the limits of the basic matching requirements. I, however, do not agree a per Section V.B.2. Please comment.

[This message has been edited by RMassa (edited 02-10-99).]

[david shipp]

In order to qualify for the ACP safe harbor, total match must be limited to 6%. This could include only "non-ADP safe harbor" matching or both ADP safe harbor and additional match (the non-ADP safe harbor match could be subject to vesting).

Where the ADP safe harbor is met with a non-elective contribution, the 6% limit on matching still applies since it is an ACP safe harbor issue. (Also, note the 4% limit on matching under ACP safe harbor if matching is discretionary.)

[Guest Do]

I agree (I think) with your firm's attorney and Shipp. One requirement for ACP safe harbor design is that, under the matching formula, the plan does not match on deferrals which are more than 6% of comp. Your firm's attorney and Shipp said a maximum match of 6%. I want to clarify that a maximimum match of 6% of comp isn't the rule. (Under this rule, a plan could match 50% of first 12% of comp deferred to the plan. This would not satisfy the requirement.) The rule is to match on DEFERRALS which do not exceed 6% of comp. You can always choose to not be ACP safe harbor (and only be ADP safe harbor) and match on deferrals in excess of 6%.

[This message has been edited by Do (edited 02-11-99).]

[david shipp]

Do, thanks for the clarification. I should have said "first 6%" to be clear.