discretionary match after QACA SH contribution

[bmore1147]

I'm working with a plan that is considering implementing a QACA SH match on 1/1/2019, but they would also like to match additional contributions over the QACA match. Specifically, they want to match 50% of contributions on deferrals between 7-10%  - auto escalating up to 10% using the QACA AE provision. They want to try and get total employee contributions over 15%, but encourage it with the discretionary match over the QACA formula. 

is the discretionary match subject only to ACP? are there other considerations with offering this additional match above the SH match limit? any help would be appreciated. 

[bmore1147]

did this get posted in the wrong place? It doesn't seem like a complex issue, but i haven't seen many matching formulas structured to be between certain deferral percentages, so i thought i would see if ACP is the only concern. i don't see a problem with facts and circumstances/reasonability because it would actually prevent HCE's making over 205k from getting the full discretionary match since a 9% deferral on 206k is $18,540... but i will defer to more experienced pros on this forum

[John Feldt ERPA CPC QPA]

They are doing QACA match. That gets you out of the ADP test. On top of that, they want to match an extra 0% from 0% of pay deferred to 7% of pay deferred, then match 50% on deferrals from 7% to 10% of pay deferred. That subjects the match to ACP testing. You test all of the matching contributions under ACP, including the QACA match. Alternatively, you are permitted to exclude the first 3.5% of pay matched from that ACP test, see 1.401(m)-2(a)(5)(iv):

(iv) Matching contributions taken into account under safe harbor provisions. A plan that satisfies the ACP safe harbor requirements of section 401(m)(11) or 401(m)(12) for a plan year but nonetheless must satisfy the requirements of this section because it provides for employee contributions for such plan year is permitted to apply this section disregarding all matching contributions with respect to all eligible employees. In addition, a plan that satisfies the ADP safe harbor requirements of § 1.401(k)-3 for a plan year using qualified matching contributions but does not satisfy the ACP safe harbor requirements of section 401(m)(11) or 401(m)(12) for such plan year is permitted to apply this section by excluding matching contributions with respect to all eligible employees that do not exceed 4 percent (3 1/2 percent in the case of a plan that satisfies the ADP safe harbor under section 401(k)(13)) of each employee's compensation. If a plan disregards matching contributions pursuant to this paragraph (a)(5)(iv), the disregard must apply with respect to all eligible employees.

But you might see a better ACP test result by testing all the match together.