Match to HCE

[Guest bernie lomax]

I have a large plan that matches 50% of the first 6%. They calculate the match annually and it is discretionary. They want me to give the match rate to the NHCEs and then give the HCE's the rate that will pass the test. So, they would be giving the HCEs less match than the NHCEs. Can this be done?

[Tom Poje]

that doesn't sound like you are following the terms of the document to me if you did it that way

[rcline46]

Well, maybe not and maybe so - since it is a discretionary match, read the document carefully under the ACP testing and correction section. It just might say something to the effect that you cannot give a match which causes the ACP test to fail. That language is actually in the Corbel documents.

[BG5150]

I have a large plan that matches 50% of the first 6%. They calculate the match annually and it is discretionary. They want me to give the match rate to the NHCEs and then give the HCE's the rate that will pass the test. So, they would be giving the HCEs less match than the NHCEs. Can this be done?

Depending on how many NHCE and HCE are participating vs not participating, the amount for the HCE's to pass the test can be more, the same or less, depending on the populations.

[austin3515]

I assume the idea is that you would only give them less, i.e., if 50% of 6% OR the max that passes the ACP test.

But that doesn't make any sense since failed ACP tests result in refunds to the affected HCE's (assuming vesting), so it seems it would be a needless cut-back. I'd be surprised if the Corbel documents actually had this buried in the basic plan documnent - do you have language you can share?

[rcline46]

4.8(f) Adminstrator may prevent project failure. If during a Plan Year the match would cause the ACP test to fail (legalese removed) the administrator may reduce the contributions.

Obviously shortened language - this is in the Corbel EGTRRA document. I would maintain that if the match were not done on a per pay basis, but after year end, the same principal applies.

[austin3515]

You would just need to be extremely careful about cut-back issues, since the HCE WOULD have received the contribution (even if it couldn't stay in the plan...).