Safe Harbor Match and Per Pay Calculation Period

[CLE401kGuy]

Client has opted for Safe Harbor match in his plan... client also prefers that match be calculated on a per pay basis - each pay date a self contained calculation period... Is this possible?

[BG5150]

I don't see why not.

Don't forget, the SHM must then be deposited no later than the end of the following quarter.

[12AX7]

It's also harder to check accuracy of the matching, unless you collect comp/deferral/match information for each payroll, or do the match calc for the client each payroll.

[BG5150]

It's also harder to check accuracy of the matching, unless you collect comp/deferral/match information for each payroll, or do the match calc for the client each payroll.

Without a doubt. We put a caveat in our year end letters saying we can only vouch for the reasonableness, not the accuracy, of the match in such cases.

[Kevin C]

The plan document must also say that is how the match is calculated. And, those provisions must be adopted before the beginning of the plan year and remain in effect for the entire plan year. The SH match allocation formula/method is a provision covered by 1.401(k)-3(e)(1).

[austin3515]

We put a caveat in our year end letters saying we can only vouch for the reasonableness, not the accuracy, of the match in such cases

Same here!

[John Feldt ERPA CPC QPA]

Good, so, when you see a plan where the safe harbor match is about 3% of their deferral amount, not approximately 3% (or more) of their compensation, you would mention this as a potential issue for the plan sponsor to look into.

We've seen a couple of plans (much like the 3% example above) where the provider, big bundled provider, somehow disclaims all responsibility, and does not notify the sponsor of the reasonableness of the match amounts - because it's calculated per payroll and they disclaim all reponsibility. 3% of deferral is tiny compared to 3% of pay - come on!

[12AX7]

The plan document must also say that is how the match is calculated. And, those provisions must be adopted before the beginning of the plan year and remain in effect for the entire plan year. The SH match allocation formula/method is a provision covered by 1.401(k)-3(e)(1).

Some documents allow for discrection as to when the match is calculated. Where it is calculated on a per-payroll basis, then the timely deposit rules prevail.

[Kevin C]

We've seen a couple of plans (much like the 3% example above) where the provider, big bundled provider, somehow disclaims all responsibility, and does not notify the sponsor of the reasonableness of the match amounts - because it's calculated per payroll and they disclaim all reponsibility. 3% of deferral is tiny compared to 3% of pay - come on!

The large providers we've seen have it in their contracts that they are not responsible for anything except processing deposits based on the client's instructions. The client is even responsible for reviewing and approving their work. At least one puts a certification line at the bottom of their ADP/ACP test for the client to certify that the testing is correct. From the obvious errors in some of the plans we've seen, there is no way anyone at the large provider looked at anything.

[austin3515]

I won't complain too loudly about their incompetence as without it we wouldn't get nearly as much business