Mid Year change in allocation formula

[dmb]

I don't think this is a cross testing question, but it is a non-discrimination question. First six months of plan year, the allocation formula was flat dollar amount (all eligible participants receive same dollar amount), sencond six months, the allocaiton formula was amended to a flat % of pay allocation (all participants receive the same % of pay). Does this fall under the safe harbor exemption?? Or does it need to be tested on at the very least and probably the most, a contributions basis?? Thanks.

[PensionPro]

I believe it meets the safe harbor exemption. See §1.401(a)(4)-2(b)(4)(vi).

[Bird]

I believe it meets the safe harbor exemption. See §1.401(a)(4)-2(b)(4)(vi).

I'm not the greatest at reading convoluted regs but I thought this was for simultaneous formulas that are added together, not different formulas for different parts of the year. Changing allocation methodologies mid-year has a clear potential for discrimination.

I'd also be concerned about whether the document properly reflects this change. If you just say "effective July 1, the formula is xxxx" but the plan has and has always had a Year-End allocation date, then the whole year s/b allocated under that formula. There has to be some specific language in the plan to allocate on other dates and compensation periods. It's not impossible but in my own experience, it's unusual.

[PensionPro]

Part of the convoluted regs is that the formula must be available on the same term to all employees. See §1.401(a)(4)-2(b)(4)(vi)(D)(1). Therefore, an hours requirement or last day employment requirement must be uniformly applied to the multiple safe harbor formulas. It could work but the details need to be reviewed.

[dmb]

Part of the convoluted regs is that the formula must be available on the same term to all employees. See §1.401(a)(4)-2(b)(4)(vi)(D)(1). Therefore, an hours requirement or last day employment requirement must be uniformly applied to the multiple safe harbor formulas. It could work but the details need to be reviewed.

After recieving additional information, the terms are not the same under both formulas so i think my question is answered. Thanks.