How do you apply true up when match stopped mid year?

[MarZDoates]

NON safe harbor 401(k) Plan. Document says match is discretionary; however, match is limited to deferrals up to 6%. Additional limit of 4% of comp applies. Document further states that limits are applied based on the plan year (i.e. "true up" applies).

Employer stopped their match mid year. Would this negate the "true up"?

If I look at match rates for the plan year, they are not "uniform". However this would make sense if someone terminated employment before the match was stopped. (i.e. they received a match of 100% up to deferrals of 3% of pay). Others who continued to defer would not receive the same rate.

Does it matter that the match percentages are not uniform as long as the ACP test passes?

I am sooo confused!

[MWeddell]

This is a matter of interpreting the plan document, so our ability to help from this distance is limited.

You say that the employer stopped their match mid year, but did they amend their document. If so, how did the amendment address the true-up match issue? If the employer merely stopped funding the match but did not amend the document, this could be bad news for the employer: the remaining match may have to be funded.

Yes, it matters that the match percentages are not uniform. Limits are applied based on the plan year, you told us, so it sounds like the employer has not followed the rules set forth in the written plan document. Now if there was an amendment and it clearly said that no match was to be allocated after a specified date, perhaps the plan document may be interpreted so that provision overrules the true-up match language.

[MarZDoates]

To my knowledge, the plan document was not amended. Crud.

[WCC]

It sounds like they just prefunded a plan year match. Plan year match formula is still in place and the employer needs to decided what the discretionary formula will be for the year. Once that formula is determined, they need to make adjustments (at year end) to the each account in accordance with the formula.

[Gadgetfreak]

But the match formula is discretionary. So couldn't the employer just use a lower formula?

[K2retire]

Yes, but that doesn't solve the issue of people having received different match percentages.

[Bird]

Restating/expanding on what WCC said...think of any contributions made as estimates. When you are basing things on annual pay, but contributing each payroll, you are prefunding on an estimated basis. Figure out who had the highest percentage based on annual pay, and then adjust everyone else up to that.