rate of match

[Earl]

I took over a plan: 401k is immediate. If you have at least 2 years of service, the match is $ for $ on 5% deferral. (if you defer 4.999% you get $0). Then, if you have 10 years of service you get 7% match on a 5% deferral (still only matching starting at 5% deferral - and stopping at 5% deferral).

How many rates of match are there? Is it 3 rates; 0%, 5% & 7%?

I am really confused by this. Thanks

[austin3515]

You've got two match formulas:

Graded Match - 0% on 0 to 4.999%, and then 100% on 5% or greater

Graded Match - 0% on 0 to 4.999%, and then 140% (right??) on 5% or greater if you have at least 10 years.

So, you need to make sure the people covered by each formula passes benefits rights and features.

[Earl]

Yes, if you defer 5% and have 10 YOS you get a 140% match.

But "and then 100% on 5% or greater" is not exactly correct. If you defer more than 5% you get 5%. If you defer less than 5% you get 0%. Maybe that is what you are saying.

The thing that confuses me is that usually employees who would get a match if they deferred are treated as benefitting for 410b.

Here an employee could actually defer and not benefit, so s/he would not make it into the numerator. That seems clear.

But I should treat employees who do not defer as "not benefitting"? Seems so but seems different than normal so it stopped me.

Or maybe what you are saying is that since there is no last day or 1,000 hours requiement, you don't 410b test? You would brf test and that is somehow different?

Thanks.

[austin3515]

I agree with you on the "anyone deferring and not getting the match would be a zero in your coverage test." But you also need to run BRF.