forfeitability and accrual requirements for matching contributions mad

[Guest NMpensions]

Will the plan satisfy the ACP safe harbor under VI.A. in this stuation?

3% safe harbor nonelective contributions are made.

Additional matching contribution satisfies VI.B.3. (other matching contributions). To receive these other matching contributions, the participant must work 1,000 hours and be employed on the last day. The other matching contributions are subject to vesting.

The 100% vesting and no accrual requirements do not appear in VI. and the Plan has a 3% safe harbor contributiion.

[Guest AL Minton]

If I understand your question correctly, you have a safe harbor 401(k) Plan which satisfies the safe harbor requirement with a NEC (non-elective contribution) and you want to know if the NEC satisfies both the ADP & ACP. First, I assume the safe harbor notice requirement was met. If it was, then your NEC will satisfy the ACP IF (1) the match is made on salary deferrals which are not more than 6% of the participant's compensation; and (2) The rate of the match doesn't increase as salary deferrals increase. This match may have a vesting schedule and last day rule.

[Guest NMpensions]

YAY!! Thank you Al Minton!!

A national employee benefits consulting firm was telling me otherwise. I said I'll write it with a vesting schedule and accrual requirements and submit it to the service and if I'm wrong you'll have to provide more matching contributions or an ACP test.

[Guest T Hoffman]

I agree with AL as to vesting. Notice 98-52 requires "safeharbor matching contributions" to be nonforfeitable. The other matching contribution ACP safeharbor formula speaks of just "matching contributions." But ...

The other matching contribution ACP safeharbor formula requires that the rate of match for any HCE who is an "eligible employee" is no greater than the rate of match that would apply with respect to an NHCE who is an "eligible employee." The ADP safeharbor provisions of Notice 98-52 obviously interpret "eligible employee" as referring to all eligible employees who make elective contributions (See ADP example 4 (the genesis of the no LDY requirement)). If the term "eligible employee" is given the same meaning for the ACP safeharbor, a LDY requirement won't work if any NHCE terms before the end of the year and any HCE satisfies the LDY requirement because the HCE would have a greater rate of match.

I am not saying that it is correct, just that it is one way of explaining the confusion.

[Guest NMpensions]

Thank you T Hoffman for a really helpful explanation. You're right, that's what the consulting firm is thinking, and I am starting to think they may be right...I still think requiring no accrual rules for other matching contributions is beyond was was conetmplated by the Code.