OK, why can't you do this?

[RayJJohnsonJr]

OK, why can't you do this? A young business owner makes max comp $245,00, deferred the max, $16,500, has 10 employees, who deferred between 5% and 12% of pay, and the plan used the Safe Harbor match($1 per $1 to 3% and 50 cents per $1 to 5% of pay). So, if the plan allows an end of year discretionary match, why doesn't the employer decide to match deferrals greater than 5% of pay up to 7% of pay (since the SHM matched up to 5% of pay) with a $5.24 per dollar match. That way the business owner gets $49,000 total ($16,500 def, $9,800 shm and $22,700 non-vested match). The cost to the employer is that 2 employees contributed more than 5% of pay and wind up getting $8,786 total.

[rcline46]

b,r,f problem on level of match, addl match not a SH and must pass ACP tests, double failure.

[QNPG]

OK, why can't you do this? A young business owner makes max comp $245,00, deferred the max, $16,500, has 10 employees, who deferred between 5% and 12% of pay, and the plan used the Safe Harbor match($1 per $1 to 3% and 50 cents per $1 to 5% of pay). So, if the plan allows an end of year discretionary match, why doesn't the employer decide to match deferrals greater than 5% of pay up to 7% of pay (since the SHM matched up to 5% of pay) with a $5.24 per dollar match. That way the business owner gets $49,000 total ($16,500 def, $9,800 shm and $22,700 non-vested match). The cost to the employer is that 2 employees contributed more than 5% of pay and wind up getting $8,786 total.

Please see 1.401(m)-3, particularly section (d). You would fail to satisfy the requirements of 401(m)(11) with formula written above causing at least ACP testing. (not to mention a BRF test)

[RayJJohnsonJr]

Thanks y'all.

OK, what's a BRF? Is there any additional match that could be made without causing problems

[QNPG]

Thanks y'all.

OK, what's a BRF? Is there any additional match that could be made without causing problems

Benefit, right or feature.

The additional match is listed in that Tres. Reg that I quoted previously. You could so long as you do not match deferrals in excess of 6% of comp and match itself does not exceed 4% of compensation.

[Lou S.]

Thanks y'all.

OK, what's a BRF? Is there any additional match that could be made without causing problems

Benefit, right or feature.

The additional match is listed in that Tres. Reg that I quoted previously. You could so long as you do not match deferrals in excess of 6% of comp and match itself does not exceed 4% of compensation...

...and does not increase as the rate of match increases.

The design in the OP pretty much fails outright on numerous levels.

[RayJJohnsonJr]

Thanks everybody, I see I'm barking up the wrong tree.