Safe harbor match formula

[Guest metallic]

We have acquired a new safe harbor match plan with a formula that I have not seen before. The formula calls for a safe harbor match of 200% on the first 2.5% of compensation that someone defers. My understanding is that if the safe harbor formula is at least as generous at each level of deferral that the basic safe harbor match formula would provide, the safe harbor requirement is met. My analysis is as follows:

Deferral %, Basic SH Match Formula, This plan's SH Match

1%, 1%, 2%

2%, 2%, 4%

3%, 3%, 5%

4%, 3.5%, 5%

5%, 4%, 5%

Since the plan's match is at least as generous as the basic SH formula, the plan's formula satisfies the safe harbor requirement.

Any thoughts? THX.

[GMK]

I think you're right.

My only issue with it is that it will encourage too many participants to defer no more than 3% (and many will think that's enough), when they ought to be working their way up to the 8-12% range to have a decent retirement income. But I digress.

[Guest metallic]

I think you're right.

My only issue with it is that it will encourage too many participants to defer no more than 3% (and many will think that's enough), when they ought to be working their way up to the 8-12% range to have a decent retirement income. But I digress.

I agree with your thoughts, GMK, on how another match could be more effective. It's a conversation for another day as they have other plan provisions that need to be addressed also.