Maximum 401k Match

[perkinsran]

A plan wants to increase match in 401k plan to 25% of first 15% saved. As long as plan can pass ACP, any issues relative to discrimination?

[cpc0506]

A plan wants to increase match in 401k plan to 25% of first 15% saved. As long as plan can pass ACP, any issues relative to discrimination?

If anything, you are discriminating against the HCE's (since they usually cannot put that high of a salary deferral percentage away) which is always ok.

[ETA Consulting LLC]

A plan wants to increase match in 401k plan to 25% of first 15% saved. As long as plan can pass ACP, any issues relative to discrimination?

If anything, you are discriminating against the HCE's (since they usually cannot put that high of a salary deferral percentage away) which is always ok.

"LIKE".

The only time there would be an issue under this type of instance would be if the 'actual rate' (e.g. 25%) were to increase as the level of employee deferrals (e.g. 15%) increase. Since anyone who defers at or below 15% is receiving 25%, then there is no issue.

Good Luck!

[Tom Poje]

was this a discretionary match, and are you talking about changing things mid year?

a few years ago there was a posting on the links as follows:

Is it permissible to modify a discretionary formula that is made during the year?

Caution is advised if the match formula is discretionary and the match is being made during the year (e.g. each payroll period or on a quarterly basis). Some IRS agents have indicated that "discretionary" match cannot be changed during the plan year. The reason is because changing a discretionary match violates Treasury Regulation 1.401-1(b)(1)(ii) that states a profit sharing plan must provide a definite "predetermined" formula for allocating the contributions made to the plan. Thus, a "discretionary" match must be the same percentage for the whole plan year.

They made it very clear that if the employer intends to change his matching percentage during a plan year, the matching formulas MUST be stated in the plan and the plan amended each time the formula is changed.

(Based on comments by IRS agents, see http://benefitslink.com/boards/lofiversion...php/t4889.html)

[perkinsran]

Thanks to all. Tom, no this is not a mid year change. They currently aren't doing anything. I just seemed to recall many years ago, I'm sure prior to the ACP test, there was a restriction (eg. 6%) on matches of after tax moneys. In my research, I could not find any restriction other than ACP passing.