Matching and Nonelective Contributions

[ERISA-Bubs]

Can a plan provide the following:

1) A percentage of compensation noneletive contribution for all employees, and

2) For employee's contributing more than 2% compensation, an additional percentage of compensation match.

There are two unusual things here.

First, the "match" doesn't kick in until we get to 2% contribution.

Second, the "match" is a percentage of compensation, not a percentage of elective deferral.

I do not see a prohibition for either, but I've also never seen either used before. Is this an allowable structure?

[MWeddell]

Yes, this is permitted.

If you take this to an extreme position, you may eventually have a problem. Suppose the match was paid only to eligible employees who contributed the 402(g) limit for employees < age 50. While the match is currently available to everyone, it may not be effectively available to everyone, so the match may be discriminatory benefit, right or feature. I don't see the problem for restricting the match to those who contribute 2% of pay.