Crazy Match for those over 50

[justatester]

Our client acquired a company that had a DB plan. The client wants to "make up" some of the loss from the DB plan. Here is what they want to do:

Current plan is Safe Harbor where they are matching 100% up to 5%.

For the acquired group of employees, if the participant is over 50, they want to match an addtional 50% on the next 3%. Is this possible? Based on the current population, they would pass BRF on the design. With this additional match, they would be required to run and ACP test.

However, my gut is telling me this may not be a permissible design. Any thoughts?

[Lou S.]

I think it is problematic in a safe harbor matching plan for a couple of reasons.

1st the prohibition on amending the plan durring the year. While there are some expections for merger/acquisition, I do not believe the exceptions allow a change in plan benefit formula.

2nd the "extra" match on top of the safe harbor would esentially be 0% of the first 5% + 50% of the next 3% for some participants which would violate the non-inreasing rate of match to keep the safe harbor status.

If this wasn't a safe harbor plan I don't see a problem with what you want to do as long as you pass ACP and BRF.

[QDROphile]

I would try to to convince somebody that a match is the wrong approach to enhancing the benefit.

[justatester]

Thank you for your comments...I guess my "gut" was right. I just could not pin point what was making me think it.

[justatester]

Another thought...If the plan decides to go forward with this formula...would the ADP still be considered Safe Harbor and then we would be required to run an ACP test. Or can they not change it mid year at all and it would impact the ADP Safe Harbor. They realize they would lose the ACP Safe Harbor.