k man Posted February 5, 2009 Posted February 5, 2009 the plan uses a discretionary matching formula. one of our clients is asking me why he cant contribute the matching contribution to the extent of the vesting percentage. For example if the participant is 20% vested they would only have to contribute 20% of the match. Clearly I know you cant do this but I am having a difficult time explaining to the client the reason other that contributions are allocated according to a formula and the vesting schedule is applied after the fact if and when employees terminate. Is there a regulation or rule that makes this clear?
QDROphile Posted February 5, 2009 Posted February 5, 2009 How about the requirement for allocation terms, and the proposed allocation is not in accordance with those terms? If the plan were amended, such a match allocation, based on years of service, could work. It might not test out very well in the end.
401king Posted February 5, 2009 Posted February 5, 2009 I don't know the regulation, but the fact is that the other 80% is still part of the plan, and can never leave the plan, so it's pointless not to fund on on as-needed basis because if they only fund 20%, then the guy terminates, then the other 80% still has to go somewhere within the plan. It's just more legwork to fund partially since the unvested amount will still be required to go into the plan. R. Alexander
k man Posted February 5, 2009 Author Posted February 5, 2009 I don't know the regulation, but the fact is that the other 80% is still part of the plan, and can never leave the plan, so it's pointless not to fund on on as-needed basis because if they only fund 20%, then the guy terminates, then the other 80% still has to go somewhere within the plan. It's just more legwork to fund partially since the unvested amount will still be required to go into the plan. are you saying if they wanted to could they do it? he seems to think it isnt pointless because obviously its easier to put it off until some point in the future.
rcline46 Posted February 5, 2009 Posted February 5, 2009 The allocation formula in the document does not consider vesting. Failure to follow the document is a disqualification issue. Client must follow the document. If not, report him to the IRS/DOL. (Wish we could do this!)
Lou S. Posted February 5, 2009 Posted February 5, 2009 As others have said the answer is simply a failure to follow the written terms of the plan document.
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