Match Annual True up to what level?

[Jim Chad]

Document says match is discretionary and annual counting deferrals up to 3% of comp. They were depositing monthly 100 cent on the dollar counting deferrals up to 3% of comp. In prior years, every year I would always do a true up at year end to comply with the doc.

In June of 2010, they stopped depositing the match because of cash flow problems. I'm looking at doing the true up now and I have a question.

Do I bring everyone up to the highest HCE which is 1.77%

or

Do I bring everyone up to the 3% received by one NHCE that left employment in March of 2010?

The doc does not have last day, 1,000 hours or any other allocation conditions.

[QNPG]

Document says match is discretionary and annual counting deferrals up to 3% of comp. They were depositing monthly 100 cent on the dollar counting deferrals up to 3% of comp. In prior years, every year I would always do a true up at year end to comply with the doc.

In June of 2010, they stopped depositing the match because of cash flow problems. I'm looking at doing the true up now and I have a question.

Do I bring everyone up to the highest HCE which is 1.77%

or

Do I bring everyone up to the 3% received by one NHCE that left employment in March of 2010?

The doc does not have last day, 1,000 hours or any other allocation conditions.

Since the plan document calls for the match to be allocated based on annual deferral and compensation figures, the amount that is funded each month does not ultimately determine how the match is allocated. You would look at the amount of match contributed for the plan year, and allocate it based on the annual deferral and compensation figures, based on the plan document. The amounts funded each month do not have a direct bearing on how the match is allocated.

Under the terms of the plan document, the right to the match has been accrued by the participant(s) and funded for at least one person setting the allocation formula.

[12AX7]

I would suggest that any true-up after the end of the year that would bring all contributing participants up to same level of match, however that level is determined, would be a reasonable approach. I'm not necessarily in favor of reducing the match of the one NHCE that received a 3% match, but it perhaps could be argued that it would be necessary (if not paid out at this point) to bring all participants to the same level.

[GMK]

FWIW, I think that Querky has it right.

[12AX7]

Yes, I agree that doing it the way QNPG suggests is correct. I was perhaps leaving open the possibility that the allocation of employer match would be something different at the end of year, when it should have been determined. Having an ongoing discretionary match based on annual comp can present it's problems which is evident in this situation.

[QDROphile]

What does the plan document say about how and when the the match is determined? In other words, how does the plan administrator know what the employer has determined the match rate to be, in its discretion? This is an interpretation problem for the plan administrator, assuming the the plan administrator has the usual authority to interpret the plan.

Based solely on the facts that have been posted, it would be difficult to conclude that the rate is less than 100 percent, subject to the 3% cap.