Matching Employer Contributions

[Guest BigO0328]

Hello,

I was wondering if someone may be able to point me in the right direction. I have a plan that pays their employer matching contribuiton on a per payroll basis. They are now asking if they can amend their plan document during the plan year with regards to their employer match. What they want to do is add a true up provision to the employer matching contributions. Am I correct that if they were SH, then they could not do this as they would lose the SH "protection" for nondiscrim testing. But, since this is not a SH plan and this benefits all EE's, does the plan have this option? Any help would be greatly appreciated. Thanks

[QDROphile]

I would love know the back story. Did some fat cat wake up early? No comment on safe harbor plan, but other design can have amendments to matching contributions Other legal requirements must be respected. Section 401(a) (4) prohibits amendments that benefit only HCEs, but a true up could benefit an unusual nonHCE. You might check the section 401(a) (17) rules relating to partial years, but I suspect the amendment for a true-up will not have a problem because the point is to apply the match to the entire year.

[ETA Consulting LLC]

I agree with QDROphile.

Generally, amendments that are at least the same or better in all instances (i.e. true up) are allowed since there is no potential for cutback. You should be fine since you are not taking away anything that has already accrued.

Good Luck!

[GMK]

I agree that you can do the amendment, but I'd run an estimate of non-discrim tests.

The biggest true up amounts are generally for those who deferral the limit before the end of the year. Usually (always?) these are HCE's. With a safe harbor plan, no contribution testing, so no problem. If not safe harbor, you may want to do some estimating to see that you still pass.

[cpc0506]

Hello,

I was wondering if someone may be able to point me in the right direction. I have a plan that pays their employer matching contribuiton on a per payroll basis. They are now asking if they can amend their plan document during the plan year with regards to their employer match. What they want to do is add a true up provision to the employer matching contributions. Am I correct that if they were SH, then they could not do this as they would lose the SH "protection" for nondiscrim testing. But, since this is not a SH plan and this benefits all EE's, does the plan have this option? Any help would be greatly appreciated. Thanks

I did not think that you could make changes to a safe harbor plan mid year especially with the safe harbor provision of the plan.

[ETA Consulting LLC]

I did not think that you could make changes to a safe harbor plan mid year especially with the safe harbor provision of the plan.

Correct. The plan isn't Safe Harbor 401(k).

[cpc0506]

I did not think that you could make changes to a safe harbor plan mid year especially with the safe harbor provision of the plan.

Correct. The plan isn't Safe Harbor 401(k).

Sorry I missed that in the orginal thread.

[Guest Sieve]

I'd accompany this amendment with a special enrollment that will permit all participants (including NHCEs) to change deferral amounts to better position them to take advantage of the true-up, since the NHCEs would tend to stop their deferrals at the match limit if there was no true-up.