BRF Testing

[justatester]

Hi,

I have a 12/31 plan that has 2 match formulas. 50% to 6% and 100% to 6%. The 100% to 6% is failing BRF.

This match was "grandfathered" to a group of 4 participants (1 HCE, 3 NHCEs) back in 2004. They were part of a larger group and the formula worked for a bit. The plan spun out in 2013 and is now a much smaller plan. It is failed BRF that year (never corrected). For 2014, the usual HCE fell below threshold therefore was considered NHCE. Now 2015, they are failing again. By the way the plan was restated in 2013 and again in 2016.

Is there any way this would be permissible since it was a "grandfather" closed group? Or do they need to expand the group receiving the match?

Thanks for any help...We are up against the 9 1/2 month deadline which is Saturday/Monday.

[Tom Poje]

there is no grandfather rule I know of

otherwise you would simply write the document all HCEs get 200% and the NHCEs get diddly-squat and the HCE benefit is grandfathered in.

that is sort of the intent of things to prevent HCEs from getting favored treatment

good luck on this one.

[justatester]

Ok added twist...

If you take an in-service withdrawal from your matching account, you are no longer eligible to receive the employer match even though you can continue to defer.

How would this be handled for BRF?

Example: Def from Jan-March-receive 50% to 6%. Take an in-service withdrawal on 4/1. Continue to defer. October 1-now eligible for the match again... My deferrals from April-September were not match therefore my overall match rate does not equal the 50% to 6%/

[Tom Poje]

never heard that done before

so I am not sure.

if you stopped deferring and took a snap shot over the whole year you would achieve the same thing, but I don't think you would treat those people as not being in the group

if the person took a hardship and so wasn't eligible to defer you don't treat them as not benefitting (as far as I know)

but I don't know the answer to your particular question. I would think the person is still in the group just because of the above mind wanderings I made

[Doghouse]

Going back to the first question, there is a sort of grandfathering rule under 1.401(a)(4)-4(d)(1), but it may or may not apply to your situation.