Benefits Rights and Features

[Guest Pension Girl]

Does having two matching formulas, one with allocation conditions, cause BRF testing due to different rates created by the allocation conditions?

For example, plan has payroll by payroll match of lets say 50% up to 5% of pay, no allocation conditions. Then plan has a discretionary match for anyone employed on the last day. Lets say the formula is 50% of pay up to 6% contributed. Under the first formula, coverage will be passed, but not the second formula. Do you apply one ACP test to both matches, and then BRF test the rates, or just do a coverage test on the second match?

Any help would be appreciated!

[Laura Harrington]

Does having two matching formulas, one with allocation conditions, cause BRF testing due to different rates created by the allocation conditions?

For example, plan has payroll by payroll match of lets say 50% up to 5% of pay, no allocation conditions. Then plan has a discretionary match for anyone employed on the last day. Lets say the formula is 50% of pay up to 6% contributed. Under the first formula, coverage will be passed, but not the second formula. Do you apply one ACP test to both matches, and then BRF test the rates, or just do a coverage test on the second match?

Any help would be appreciated!

There are 3 separate requirements that have to be satisfied:

1. Coverage: anyone who benefits under 401(m) is treated as benefiting. Whether they are eligible for only one of the matches or both is irrevelvant.

2. Nondiscrimination in Amount, aka ACP test: test all the match together.

3. Nondiscriminatory availability of each rate of match: You need to do the benefits, rights and features testing to determine if each rate of match is available on a nondiscriminatory basis.

[Guest Pension Girl]

THANK YOU

[buckaroo]

I agree with the OP and had come to the same conclusions as by Laura Harrington. However, I have a slightly different situation. For my situation, the payroll match is the same as the OP. However, substituting the discretionary match, I have a "true-up" contribution for only those active at EOY. BRF is obviously required, but my thought concerns someone who receives the match troughout the year and has a $0.00 true-up. Could I consder them part of the group receiving the true-up as it is zero?

Any thoughts would be greatly appreciated.

[BG5150]

...someone who receives the match troughout the year and has a $0.00 true-up. Could I consder them part of the group receiving the true-up as it is zero?

I certainly would consider the person as "receiving a true-up." The driving factor is not the amount, but the fact that the person was employed on the last day of the year. The plan shouldn't be penalized for no change in the person's deferrals or compensation.