John A Posted October 11, 1999 Posted October 11, 1999 Chris, yes, it seems to me to be an accurate interpretation. This is an interesting question. It appears to me that the immediate vesting requirement only applies to the contributions used to satisfy the ADP test safe harbor. In the situation you describe, obviously the matching contributions are not being used to satisfy the ADP safe harbor. It appears that the only restrictions on the matching contributions to satisfy the ACP test safe harbor are the formula limitations described in Section VI.B. I do not see anything in VI. that would prevent the use of a vesting schedule or last day rule for matching contributions that are not being used to satisfy ADP. One thing I'm curious about: do you have any idea when the following requirement of Section VI.A. would NOT be met: "(i) each NHCE eligible to receive an allocation of matching contributions under the plan is also an eligible employee under a CODA that satisfies the ADP test safe harbor of section V" ?
chris Posted October 11, 1999 Posted October 11, 1999 Client will make 3% nonelective contribution. Thus, the ADP safe harbor is met. Client will provide matching contributions as follows: 100% on first 3% of compensation; 50% from 3% to 6% of compensation. The matching formula appears to meet the requirements of the ACP safe harbor (see Example 2 of Sec. VI.B. of 98-52). The 3% will be nonforfeitable, etc..... however, the matching contributions will be subject to certain requirements, vesting, last day of the year employment,etc.... Does the above seem to be an accurate interpretation? ------------------
MWeddell Posted October 11, 1999 Posted October 11, 1999 I agree with the above posting. Answering the side question posed by John A., one situation I've seen twice where the group of employees eligible to receive 401(m) matching contributions is larger than the group of employees eligible to make 401(k) elective deferrals is for health systems that include both not-for-profit and for-profit affiliates. The not-for-profit employees are eligible for a 403(B) program instead of the 401(k) plan. The matching contributions are all made in a qualified plan based on either 401(k) elective deferrals (made to the qualified plan) or 403(B) elective deferrals made to a 403(B) plan. I agree that it's not a very common set of circumstances. [This message has been edited by MWeddell (edited 10-11-1999).]
MWeddell Posted October 11, 1999 Posted October 11, 1999 [Deleted multiple posting] [This message has been edited by MWeddell (edited 10-11-1999).]
MWeddell Posted October 11, 1999 Posted October 11, 1999 [Deleted multiple posting.] [This message has been edited by MWeddell (edited 10-11-1999).]
John A Posted October 11, 1999 Author Posted October 11, 1999 Thanks, MWeddell. The situation you mention at least gives some meaning to the rule for me.
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