An "other right or feature" for BRF testing

[Belgarath]

Unusual situation. Suppose safe harbor match, with a per payroll match. Deposit requirement for match on deferrals made in a given quarter is therefore by the last day of the following quarter.

Reasons don't matter, but payroll system is such that for most employees, the match is actually deposited per payroll. For other employees, system won't handle it, so deposit of their safe harbor match is proposed to be made monthly or quarterly. 

This seems to me to fall under the "other right or feature" category in 1.401(a)(4)-4(e)(3), and therefore subject to BRF testing. And so, as long as these employees represent less than the 50% safe harbor percentage, it would pass. Other opinions/thoughts?

[Luke Bailey]

Others may have more informed thoughts, Belgarath, e.g. notes from IRS nonbinding answers at a conference (I think this has been discussed in that environment),  but since this is driven by a quirk of payroll system, and any given employee (e.g., based on worksite) might fall into one or other, I would see an argument that just based on ordinary meaning of words it is not a right (because whether you get it is random and you cannot demand it) or feature (because it is something imposed by system constraints, not desired/designed by employer).

[Doc Ument]

Belgrath,

Although I am not a testing expert, as a participant, I would expect to receive the earnings (or losses) over the same period as every other participant who is receiving the same contribution under the same formula and who is making the same investment, i.e., this does not strike me as something that "cannot be expected to be of meaningful value."  In addition, the right to a particular investment is a BRF, and while this question does not deal with specific investments, why should John get to invest in ABC Mutual Fund a month sooner that Jane, especially if there is a dramatic upswing or downswing in the market during that period?  If one service provider is slower than the other, then the employer, it seems to me, should slow down the fast provider and make the deposit at the same time for everyone.

Suppose Joe gets to get his deferrals deposited by ABC payroll company one month sooner than Judy gets her deferrals deposited by XYZ payroll company, even though they work for Wally's Widgets?  Might the DOL conclude that the employer should be using only a single transmittal company, i.e., the faster transmitter, so as to separate deferrals from employer assets as soon as administratively feasible?  Would not the same reasoning apply here?  I acknowledge that deferrals are not the same as a match, but as a fiduciary, I'd be looking to move to uniform deposit timing just as fast as I could, solely out of an abundance of caution and best practice.  (But, I suspect I might be preaching to the choir.)

In addition, assuming the BRF does apply, are those sub-populations stable from year to year?  And if not, what's the correction if the test unexpectedly fails? Whatever the fix is, I bet those calculations will be more expensive, when added to the "damages," than making uniformly timed deposits for all participants, at least if this is a big company with lots of participants making lots of different investments.

You solicited thoughts, not an opinion, and such are my thoughts.  In fact, I have no opinion, because I am in territory I normally decline to occupy, at least in this forum.

[Belgarath]

Thanks for the responses.