Safe Harbor Plan w/ additional Match - ACP Test or not?

[Guest Puff]

Relevant Background Information:

401(k); Safe Harbor Non-Elective; additional non-SH match.

Age 21 & 1 year of service with dual entry on 1/1 & 7/1.

Adoption agreement specifies that participants must complete 1 year of service to receive the match.

Further, it defines 1 year of service as 1,000 hours.

Match formula = 50% on the first 3% of comp deferred (max 1.5%)

Questions:

2-part question whether ACP testing is required on non-SH match or not...

IRC 401(m)(11) indicates no testing IF...

- the additional match is not based on deferral exceeding 6% of comp (okay);

- Ma formula cannot escalate (okay);

- % cannot be greater to HCEs than NHCEs (checkmark);

- Ma cannot exceed 4% (okay); and

- the additional match cannot impose an hour and/or last day requirement to

receive.

That last point regarding hours is where we need clarification.

Adoption agreement specifies that participants must complete 1 year of

service to receive the match. Does not specifiy hours in that section.

But, the agreement defines 1 year of service as 1,000 hours elsewhere. I

could see the last point causing a need to ACP test. Here are my questions...

(1) Would we need to ACP test?

It just so happens that all participants who deferred worked

more than 1,000 hrs anyway. Anyone with less than 1,000 hours didn't defer

to receive a match. Therefore, no one was excluded from receiving match

due to hours.

(2) If question 1 is yes, then due to additional facts and

circumstances would that be enough to avoid ACP testing for the plan year?

[Tom Poje]

the fact no one was excluded from the match (for this particular yea) has no bearing.

you simply can't have an allocation requirement for the discretionary match

e.g. you have people in the plan, they know they aren't going to work 1000 hours, so based on the terms of the document they do not defer because they know they can't get a match.

it blows the safe harbor requirement out of the water

[Guest Puff]

Tom, thanks so much for your response. Confirmed my thoughts on the matter!