Change to Match Formula - after year end?

[jmartin]

There is an audited plan with 700 employees. They have a matching contribution. It is calculated on a pay period basis.  Client would like to convert to matching on year-to-date minus prior (ie true up).

Reason is they have some sales people who receive bonuses near the end of the year, in which they max their 401k contribution. Due to pay period, they don't receive a full match and they want their salespeople to receive higher matching dollars. This would impact approximately 10 HCE's and 100 NHCE's. Obviously the HCE's affected would be getting more matching dollars than the average NHCE. 

Can the 2016 plan year be amended in 2017 to change how the match is calculated? Assume it is not a discretionary match.

 

[K2retire]

Does the document specifically say true ups are not allowed? Some do, others leave it as discretionary.

[CuseFan]

Agree step 1 is to verify how the document specifies the match is calculated - it could say on a per pay period basis but the client could still actually deposits after year-end and vice-versa, where it says calculated at year-end but deposits could be made throughout the year.

Regarding amendment - it would be a discretionary amendment and it's too late for 2016, would have had to have been executed by 12/31.

[Kevin C]

It's not too late for an -11(g) amendment.  You may have a problem satisfying the discrimination requirements under -11(g), but it's worth looking at.  That's 1.401(a)(4)-11(g).

If it doesn't work, you can still change it for 2017 and forward.

 

[BG5150]

On 2/24/2017 at 2:15 PM, Kevin C said:

If it doesn't work, you can still change it for 2017 and forward.

 

Only if it's a discretionary match.  Or, if it's a stated match, only if no one has earned the right to it yet.  (Which I would doubt, if they are calculating it on a payroll basis.

Otherwise, you would have to pay the stated match to those who have earned it thus far and then prospectively change your formula.

[Kevin C]

Other than possibly a few cents from rounding, I don't see how anyone can get less of a match with a year-to-date true-up than they would under the same match formula applied on a payroll-by-payroll basis.  As the OP points out, some will get more match with a true-up. You can amend during the year to make a contribution more generous retroactive to the beginning of the year.  As BG mentions, you can't amend to retroactively reduce a contribution someone has already earned.  I don't see 411(d)(6) being a problem here unless for some strange reason you tried to reduce the match allocated for periods prior to the amendment. I don't read the OP as saying they want to reduce anything.