Safe harbor formula

[QNPG]

I have a client who wants the following safe harbor formula: 300% of the first 1%, then 100% of the next 5%.

With the ACP safe harbor requirement that the plan limit the actual match to no more than 4% of comp, is there anything wrong with stating the formula this way? I suggested they use the regular enhanced formula with an addt'l discretionary match but they insist on the formula stated above.

Any thoughts?

[Tom Poje]

so at 2% deferral, everyone receives 4% match, that is as good as the basic match, so far so good

the rate of match doesn't increase as one defers more, so that is good

the enhanced match is not on deferrals > 6%, so that is good.

the 4% rule only applies to a discretionary match so based on the facts stated, I believe the formula is ok and no ACP testing is required.

but then, I have left my brain at home on occasions, so I might be missing more than just that item.

[QNPG]

so at 2% deferral, everyone receives 4% match, that is as good as the basic match, so far so good

the rate of match doesn't increase as one defers more, so that is good

the enhanced match is not on deferrals > 6%, so that is good.

the 4% rule only applies to a discretionary match so based on the facts stated, I believe the formula is ok and no ACP testing is required.

but then, I have left my brain at home on occasions, so I might be missing more than just that item.

Thanks, Tom. I appreciate your input.