odd match formula failing BRF?

[AlbanyConsultant]

I've got a plan where the match is 100% of the first 4% deferred (as a safe harbor match) + 0% on the next 4% deferred + 50% on deferrals from 8% - 15%. I know, it's weird; the plan initially had 50% on the first 15% but kept failing ADP, so someone converted it to a safe harbor, on the idea that "front-loading" the first 8% into 4% was beneficial to the NHCEs.

No surprise, the additional match formula is where I'm having the problems. Not only is it failing ACP, but I wonder if I might have a b/r/f problem as well. 2/2 HCEs defer enough to get this match, but only 2/14 NHCEs do as well (we had several new NHCEs this year that really changed the demographics).

Is this a problem? And, if so, how can I fix 2014 (and presumably 2015)? Some kind of QMAC to bring more of the NHCE's up to 8%+ deferred?

Thanks.

[Tom Poje]

along similar lines, in 2006 someone asked "Could automatic enrollment begin at 10%" and the response was that it would probably violate 'effective' availability, so arguably you could be correct,

[AKconsult]

yes, this formula will fail BRF. Only 14% of the nonHCEs are benefitting from the 3rd tier of the formula. You will need to calculate your safe harbor % to see what % needs to benefit from that 3rd tier, but 14% will definitely not be enough to pass.

In order to correct for 2014 and 2015 you will need to prepare an 11(g) corrective amendment and bring in enough employees at the higher match rate to make the testing pass. Yes, I would do this as a QMAC, fully vested. This amendment must be made by 10/15/15 for the 2014 plan year (9 1/2 months after plan year-end).

But ultimately the client needs to be informed that they cannot continue to use this type of formula. It is not permissible to continually fail, correct; fail, correct; etc.

[BG5150]

But ultimately the client needs to be informed that they cannot continue to use this type of formula. It is not permissible to continually fail, correct; fail, correct; etc.

An 11-g amendment is used to avoid a failure, not correct one. It's considered a pre-emptive strike. At least, that's the way I've always seen it.

[Tom Poje]

I think the terminology might be a moot point.

even the regs under 11(g) use the term 'corrective amendments' rather than 'avoiding failure amendments'

[BG5150]

Is there a problem using one every year?

[Tom Poje]

1.401(a)(4)-11(g)(3)(vi)(A) says corrective amendment is not a pattern of amendments being used to correct repeated failures with respect to a benefit, right, or feature

I think I've seen some argue "I'm not correcting a BRF I'm correcting other failures"

somehow I don't think that is the intent of the reg.