Jim Chad Posted April 21, 2011 Posted April 21, 2011 I'm just not sure. The non standardized prototype says match is fixed at 100% on deferrals up to 1% of comp. Calendar year plan and comp is annual for the match calculation. There are no hours or last day allocation requirements. They are having growing pains and would like to stop the match. I told them they can stop paying match every pay and make annual payment. But their question to me is can they stop the match midyear? I think no. What do you all think.
QNPG Posted April 21, 2011 Posted April 21, 2011 I'm just not sure. The non standardized prototype says match is fixed at 100% on deferrals up to 1% of comp. Calendar year plan and comp is annual for the match calculation. There are no hours or last day allocation requirements. They are having growing pains and would like to stop the match. I told them they can stop paying match every pay and make annual payment. But their question to me is can they stop the match midyear?I think no. What do you all think. Since the determination period for compensation (seems) to be annually, and the allocation formula is already established, you would need to make the match based on full year comp at the end of the year. So, they could stop contributing now but true-up at year end. Double check that the document states that the determination period says annually. If it does not, then you may have a chance to stop it currently without having to true up at the year end. "Great thoughts reduced to practice become great acts." William Hazlitt CPC, QPA, QKA, ERPA, APA
30Rock Posted April 21, 2011 Posted April 21, 2011 Does the plan document allow you to specify that the compensation period for the fixed match will be based on compensation accrued through a certain date? I have seen plans where this language could be added to stop the compensation accrual at the time the fixed match is suspended.
Kevin C Posted April 21, 2011 Posted April 21, 2011 To start with, I'm assuming this is not a SH match since there are rules in the 401(k) and 401(m) regulations for suspending or reducing a SH match mid-year. Section 411(d)(6) only protects benefits that accrue before the applicable amendment date [1.411(d)-3(b)(3)(ii)], so why would they be required to fund the match for the full year? If they amend to remove the match it can not be effective retroactively since that match has already accrued. But, that does not prevent them from stopping the match for the remainder of the year. Amend the plan to prospectively eliminate the match for the remainder of the year similar to what you would do if it were a SH match. The only difference is that the 30 day advanced notice is not required since it is not a SH match. They can't change the conditions for receiving the match after they have been met [1.411(d)-4 Q&A 1 (d)], but that isn't what is being discussed.
QNPG Posted April 21, 2011 Posted April 21, 2011 To start with, I'm assuming this is not a SH match since there are rules in the 401(k) and 401(m) regulations for suspending or reducing a SH match mid-year. Section 411(d)(6) only protects benefits that accrue before the applicable amendment date [1.411(d)-3(b)(3)(ii)], so why would they be required to fund the match for the full year? If they amend to remove the match it can not be effective retroactively since that match has already accrued. But, that does not prevent them from stopping the match for the remainder of the year. Amend the plan to prospectively eliminate the match for the remainder of the year similar to what you would do if it were a SH match. The only difference is that the 30 day advanced notice is not required since it is not a SH match. They can't change the conditions for receiving the match after they have been met [1.411(d)-4 Q&A 1 (d)], but that isn't what is being discussed. Considering that there is no allocation requirement (year of service or end of year requirement to receive the contribution) so long as they are employed and not excluded, they are entitled to receive the match based on the rate in which they made through out the year. The reason is because they have no allocation requirement, the determination period to consider the amount of comp to take into consideration is annually and they have already started to make contributions which establishes the allocation formula. They are required to make that match. This situation could be different if the determination period were payroll by payroll OR they hadn't started to make the match already throughout the plan year already (establishing the allocation formula). The match allocated to the participants for the plan year must be what the document says it will be. Generally, the plan document matching formula will reference annual compensation and deferrals. However, matches can be calculated based on payroll period compensation and deferrals, but the document must specifically say so. Calculating and depositing a match based on payroll periods is an administrative procedure, it does not, in any way, affect the amount of the match that the participants are entitled to at the end of the plan year - or whatever period the document states. In other words, matching on a period pay period basis must be in the plan document. Sorry! "Great thoughts reduced to practice become great acts." William Hazlitt CPC, QPA, QKA, ERPA, APA
Tom Poje Posted April 21, 2011 Posted April 21, 2011 Corbel has a comment regarding fixed match elimination dated 2/10/2009 and can be found here http://www.relius.net/News/TechnicalUpdates.aspx?ID=433 summed up: yes, but have to fund through date of amendment examples are provided, and additional comments
QNPG Posted April 21, 2011 Posted April 21, 2011 Corbel has a comment regarding fixed match elimination dated 2/10/2009 and can be found herehttp://www.relius.net/News/TechnicalUpdates.aspx?ID=433 summed up: yes, but have to fund through date of amendment examples are provided, and additional comments Thanks, Tom. That makes total sense; however, that leaves me wondering what the terms of the plan say with regard to compesnation taken into consideration when an allocation formula is clearly established and there are no allocation requirements to receive it and the determination period is annual. Your personal opinion? "Great thoughts reduced to practice become great acts." William Hazlitt CPC, QPA, QKA, ERPA, APA
Tom Poje Posted April 21, 2011 Posted April 21, 2011 I think any answer in general always raises other question. In this particular situation, I just noticed the document mentioned was a prototype, and those scare me. It always seems like there are other rules attached to those, because they are guaranteed of passing averything. since there are no alloaction requirements, I'd think you use comp through the date of the amendment. I'd think you have to true up through that date through the comp at that date. While the comments said you didn't have to provide a notice (like you would for a safe harbor) you still have to eventually provide a SMM or a revised SPD. I'd provide some type of notice because the employees are going to find out eventually, and why casue any more grumbling then what has started. I'd admit I wasn't sure which way to lean on the answer to this one without looking for some other explanation. I thought the comments provided were well written. .......... Have a blessed Easter everyone!
QNPG Posted April 21, 2011 Posted April 21, 2011 I think any answer in general always raises other question. In this particular situation, I just noticed the document mentioned was a prototype, and those scare me. It always seems like there are other rules attached to those, because they are guaranteed of passing averything.since there are no alloaction requirements, I'd think you use comp through the date of the amendment. I'd think you have to true up through that date through the comp at that date. While the comments said you didn't have to provide a notice (like you would for a safe harbor) you still have to eventually provide a SMM or a revised SPD. I'd provide some type of notice because the employees are going to find out eventually, and why casue any more grumbling then what has started. I'd admit I wasn't sure which way to lean on the answer to this one without looking for some other explanation. I thought the comments provided were well written. .......... Have a blessed Easter everyone! Thanks, Tom. Happy Easter~! "Great thoughts reduced to practice become great acts." William Hazlitt CPC, QPA, QKA, ERPA, APA
K2retire Posted September 28, 2011 Posted September 28, 2011 Related question. Employer stopped their fixed per payroll period match 4-1-2011. By year end they expect to have a significant forfeiture balance that needs to be used to reduce matching contributions. In calculating the discretionary match, can they use deferrals and comp from 4-1 to 12-31, or must they use the full year?
Kevin C Posted September 28, 2011 Posted September 28, 2011 K2, you'll have to look to the plan document for the answer. What does the plan say?
K2retire Posted September 29, 2011 Posted September 29, 2011 It says the match is discretionary. The section on the time period for match indicates that it is not applicable if the match is discretionary, hence my confusion.
Jim Chad Posted September 29, 2011 Author Posted September 29, 2011 K2retire, if the "normal" in the document is full year comp, and you can't find an exception, then I think you have to use full year comp. This is my guess as to what the doc says and my never to be humble opinion. LOL
Kevin C Posted September 29, 2011 Posted September 29, 2011 I agree with Jim. That's also what I would expect it to be unless the amendment stopping the fixed match says something different.
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