Not really a match?

[Earl]

Taking over a plan and find a match design that I think is not really a match.

There are 3 service levels. One is: If you have over 10 years of service and you defer at least 5% of pay you get (what they call) a match contribution of 10% of pay.

So if you defer 5% or 6% or 7% up to the dollar limit, you get 10% of pay.

It seems to me that the "match" is really a non-elective contribution because it is not calculated with respect to the deferral. Each person's match is (potentially) a different percent of the deferral.

Am I correct that this is a problem or do I just have to figure out the rate of match each year for each HCE and BRF test each rate of match?

Thanks

[ETA Consulting LLC]

There is a contengent deferral rule that basically states that a "matching contribution" is the only contribution that may be contengent upon a participant making a deferral. What this says to me is: if you must defer in order to receive it, then "by definition" it is a matching contribution and should be tested under ACP. Many plans have a zero compensation match stating that anyone who contributes will receive "x" percent of pay; regardless of the level in which they contribute. It's safe harbor since those who contribute at a higher rate will receive a lower "rate" of match.

In your case, those who contribute at 4 percent or less will not receive a match. This will create the need for additional testing, but it's doable.

Good Luck!

[Earl]

So I would see what this does in terms of creating a rate of match for each HCE and BRF test it?

Tier 3 is a 10% of pay contribution if you defer 5% of pay (200%).

I see references to extra testing if the match is more than 100% of the deferral but I can't understand it. Any clarification you could offer on that?

Thank you

[movedon]

Each rate of match (the "service levels") is tested for current availability. The increasing rate of match in the 10 year service tier is an effective availability issue.

[Earl]

Yes, but the question is what are the rates of match.

Is it tied to the "10 years of service = 10% of pay" or is the rate of match as a percent of deferrals tested?

The match for the HCEs in the 10 yr group is all 10% of pay but as a percent of deferrals it is

200%

200%

175%

114%

100%

80%

60%

53%

Thanks