Cross-Tested Match for a 401(k) Plan

[Guest SPollock]

I have a client who has a 401(k) plan with a 25% match on the 1st 6% for all employees. We were discussing the advantages of a Cross-Tested P/S. He asked if this formula could be used for the match. For example have two groups, HCEs and NHCEs, where the NHCEs continued to receive the 25% match but the HCEs received 50% (or 100%) on the 1st 6%. Is something like this possible and could it get approval?

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[Tom Poje]

technically, the answer is Yes, but you would never pass discrimination issues. In other words, in addition to the ACP test, you have to test each rate of match as well. Since no NHCEs benefit under the higher rate, that particular rate of match would fail the ratio percentage test.