ombskid Posted June 25, 2012 Posted June 25, 2012 Plan document has a discretionary match. Company has used the same formula for several years, and matched each pay period. Is there a fixed period notice requirement to suspend the match?
ETA Consulting LLC Posted June 25, 2012 Posted June 25, 2012 Since the match is discretionary, you don't want to risk violating the definitely determinable formula rule by providing the discretionary amount for only part of the year. If you were going to discontinue the match at the end of the year, then no amendment would be required (since it's discretionary). To be safe, one approach may be to amend the formula to a fixed formula effective the first day of the current year and run the formula a month out; and then discontinue the match fixed formula. You may even provide a true-up. Obviously that would be overkill, but it would certainly be safe. Otherwise, you would appear stuck in the 'discretionary' formula that should be applied through the entire year. Just one approach. Good Luck! CPC, QPA, QKA, TGPC, ERPA
rcline46 Posted June 25, 2012 Posted June 25, 2012 OTOH, I think you can stop the discretionary match at any time. I do believe you should give notice to the employees that the match is being stopped, especially if your document says it will be made on a per payroll basis. I do not think, nor have I ever heard of this being challenged on a definitely determinable basis. It was determinable while being given, but an allocation of -0- is also definitely determinable.
ombskid Posted June 25, 2012 Author Posted June 25, 2012 Since the match is discretionary, you don't want to risk violating the definitely determinable formula rule by providing the discretionary amount for only part of the year. If you were going to discontinue the match at the end of the year, then no amendment would be required (since it's discretionary). To be safe, one approach may be to amend the formula to a fixed formula effective the first day of the current year and run the formula a month out; and then discontinue the match fixed formula. You may even provide a true-up. Obviously that would be overkill, but it would certainly be safe. Otherwise, you would appear stuck in the 'discretionary' formula that should be applied through the entire year.Just one approach. Good Luck! I was under the impression that with a discretionary match it could be discontinued anytime. Even safe harbor matches can now be discontinued during the year - reverting back to adp testing. I was mostly looking for a minimum notice time period if there is one.
jpod Posted June 25, 2012 Posted June 25, 2012 While it is a discretionary match, it is hard to give thoughtful advice without knowing exactly what was said, how it was said and when to all employees.
Bird Posted June 25, 2012 Posted June 25, 2012 You don't have to give any kind of notice. The only issue you have is if the plan actually says matches are determined on a payroll basis, in which case, assuming prior calcs were done properly, you just stop; or if the plan says they are determined on an annual basis, in which case you'll have to calculate the actual matches done for each participant at the end of the year and (presumably) add some money to those who didn't get as much as others. It would be nice, though, to communicate the change informally. Ed Snyder
jpod Posted June 25, 2012 Posted June 25, 2012 Bird, for the sake of argument let's assume the employer's consistent communication to the employees was something like "we'll match 50 cents on the dollar for your 2012 contributions," without saying anything else, such as "we reserve the right to stop at any time during 2012." Are you confident that the employer is not bound to continue the match for the entire year?
Bird Posted June 26, 2012 Posted June 26, 2012 Bird, for the sake of argument let's assume the employer's consistent communication to the employees was something like "we'll match 50 cents on the dollar for your 2012 contributions," without saying anything else, such as "we reserve the right to stop at any time during 2012." Are you confident that the employer is not bound to continue the match for the entire year? In my opinion they have an employee relations problem but not a plan problem. Ed Snyder
Tom Poje Posted June 26, 2012 Posted June 26, 2012 see also bullet point 3 http://www.relius.net/News/TechnicalUpdates.aspx?ID=433
ombskid Posted June 28, 2012 Author Posted June 28, 2012 see also bullet point 3http://www.relius.net/News/TechnicalUpdates.aspx?ID=433 Thanks for the repies. I also think they have an employee relations problem but not a plan problem. Employees will be notified that the match will be suspended.
jpod Posted June 28, 2012 Posted June 28, 2012 I too think that they probably don't have a plan qualification problem. I am not so sure they don't have a Title I problem.
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