Missed Match True-Up Contributions

[ERISAGal]

Assisting a 403(b) client with a question regarding whether to perform match true-up calculations and what may or may not need to be done for prior years.  Their Recordkeeper had prepared their plan document and the language is not as clear as one would prefer (Adoption Agreement or Basic Plan and Trust).  The client has been paying in their employer match on a payroll basis each year.  This year during the plan audit, it was determined that the plan document language bases the match calculation on Plan Year compensation and the Recordkeeper indicated that a true-up would be needed.  

This had never been mentioned to the client in the past either by the recordkeeper, prior plan auditor or their TPA that was hired on a limited-scope basis to perform certain additional tests that were not handled by the recordkeeper.  

The client is trying to determine if they do have to calculate and pay in the required true-up match, how will this impact all of the prior plan years that they have NOT done this or is there any other options available for correcting this problem.

Before getting ERISA counsel involved, I wanted to explore all possible options for the client.  

Everyone's comments are greatly appreciated!  Gotta love the Friday projects....

[Luke Bailey]

ERISAGal, if you think that the plan document requires it now, then presumably unless the language was different in prior years (and you say it was not), then they have a "failure to follow" plan document error for prior years that would be correctable only under EPCRS. In similar situations I have looked hard to determine whether there was any possibility that the  plan language could be interpreted in a way consistent with the way the employer operated the plan. Sometimes it can be. When it cannot, we recommend EPCRS, which of course will cost a little in terms of the likely requirement for make-up contributions.

[JackS]

What Luke said but if the plan document is suitably vague, it is the legal Plan Administrator's responsibility to interpret the document.  Review the docs, look at the SPD, and any other employee communications see if there is anything that requires or states the match be calculated one way or another.  Many times, that provision is "discretionary", which can mean that the ER can decide year to year how to calculate the match.