Wierd Match

[PFranckowiak]

I have a client that wants to be nice to the little guy.

Sponsor Wants a regular match formula of say 25% up to 6%

Then for every participant that defers at least 1%, they want to give a minimum match of $500.00

Note: Eligibility is one month, Match requires 500 hours/ last day.

Potential for HCE owners family members to fall into the minimum $500.00 match.

So someone that works 500 hours at $10 per hour - earns $5000 for year year a defers 1% or $50.00 would get $500.00.

Someone with less than 1% would just get the 25% match.

I can see where this might become a problem if any HCE's fall into that category.

Any suggestions??? Anthing discriminatory - if the ACP test passes?

Thanks

Pat

[Guest GeerTom]

Look at Regs. 1.404(a)(4)-2(b)(4)(vi). That should solve the problem. It allows two design-based safe harbor formulas as long as each fits in a safe harbor separately. the 1%/$500 formula is odd, but should be OK, so the combination should be OK.

Tom Geer

[ESOP Guy]

You could also just exclude people who are HCE's by family attribution from that part of the match formula. No one cares if you discriminate against HCEs.

[Guest GeerTom]

Nice touch.