Age Weighted Match?

[KateSmithPA]

One of our client's advisors has recommended a type of age weighted or new comp matching contribution. We have never heard of such a thing.

Could anyone point me in the right direction for research?

Thank you.

Kate Smith

[ETA Consulting LLC]

Two acknowledgements: 1) Advisors can be very dangerous; and 2) Beware of semantics.

Many advisors incorrectly refer to any Employer contribution as a "match"; where industry professional (such as us) classify each type of contribution based on it's features (i.e. deferral, employee after-tax, rollover, non-elective, match).

Three rules apply to match: 1) Must be made pursuant to a definitely determined formula. In theory, you would base the rate of match received on the age of the participant as long as it is stated in the plan. 2) That formula has nothing to do with how the match is tested. You must pass the ACP test and you must ensure you have 'rates' of match that are non-discriminatory. 3) Unlike non-elective contributions, there is no test for matching contribution that allows for leveraging age.

Good Luck!

[Mike Preston]

I agree with ERISAToolkit. It is far more likely that the design of this plan incorporates a non-elective contribution for each individual determined as a percentage of deferral with a factor based on age. While clever, it would fail one of the basic 401(k) requirements that no form of compensation or employer contribution OTHER THAN A MATCHING CONTRIBUTION be dependent upon deferrals and hence would be disqualified.

It therefore is a requirement that anything talked about as a matching contribution (with or without an age component) must, in fact, be a matching contribution. As ERISAToolkit accurately points out, there is no age leveraging of a matching contribution in the ACP test (one CAN argue that age leveraging is available in the average benefits test on all contribution types, but my guess is that this level of detail is beyond the scope of the initial question).

[KateSmithPA]

Thank you both for your most helpful replies.

[Guest isg2013]

related to OP--if a plan has different rates of match for different divisions, --division A has formula of 100% up to 6 and division B has 50% up to 2 --

BRF would need to be tested?

If the same plan had different rates of match for different adopting employers, BRF need to be tested.

(alnog with ACP test).