401k Match or Nonelective

[perkinsran]

We have a 403b plan that provides a 7% match but only to employees who contribute at least 5%.  Is the plan tested under the ACP test or the Nondiscrimination test under 401(a)(4)?   I assume the ACP since it is conditioned on the employee contributing. 

[Madison71]

What is the match formula?  Is it 140% on the first 5%?  What if you defer 4%...how much do you get.  Match is subject to the ACP Test

[perkinsran]

There is no "Matching"formula.  The document says if you contribute at least 5%, we will give you a 7% contribution.  So if you do 4%, you get nothing.  If you do 10% you get 7%.  So you either get 7% or 0%. 

[CuseFan]

it's contingent on a salary deferral, still think it's a match. i think the only way it's not a match is if the 5% deferral is mandatory (possibly as a condition of employment) - you have to do 5% to be in the plan, can't do anything less.

[Z0ra]

Maybe you can think of the match as a tiered match as follows:

• Deferrals between 0-5% get 0% match
• Deferrals 5% and above get 7% match

Then you would test the match in the ACP test, and in addition you would need Benefits Rights and Features test to deal with tiers of the match.

 

[Luke Bailey]

Agree with the above. See Treas. reg. 1.401(m)-1(a)(1)(ii) (for the BRF issue) and (a)(2) (for the "are these matching contributions" issue).

[perkinsran]

Thanks so much.  That is what I thought.  The fail the ACP test but we could pass the 401(a)(4) test.  The prior bundled vendor did not do anything.  We just picked this plan up.  It is a fairly large plan and they are going to be surprised when I tell them we are going to have some refunds to deal with in the next four weeks.

[BG5150]

Who's going to look at past years?  Get your VCP pencils sharpened.