Discretionary Match formula different for participating employer

[AmyETPA]

Client has a discretionary match formula, first half of the year they've done 100% up to 2% but starting July 1 will increase to 3%.  They however want to leave the participating sponsor employees at the 2%.  My thought is that is acceptable as long as they pass ACP and as long as there isn't a disproportional amount of NHCEs in the participating sponsor. Would you agree?

[C. B. Zeller]

I agree. You are on the right track with "disproportional amount of NHCEs;" more specifically, you have to pass the effective availability test with respect to the 3% match. Essentially the group of employees to whom the 3% match is available has to satisfy the 410(b) ratio percentage test.

[BG5150]

Does "discretionary match" mean I can give everyone a different rate of match as long as it passes testing?  Or that the match formula that applies to the entire plan is at my discretion?

[Bill Presson]

32 minutes ago, BG5150 said:

Does "discretionary match" mean I can give everyone a different rate of match as long as it passes testing?  Or that the match formula that applies to the entire plan is at my discretion?

Agree with this. Be careful the document allows what you're trying to do. 

[BG5150]

1 hour ago, Bill Presson said:

Agree with this. Be careful the document allows what you're trying to do. 

I would ask the document provider to weigh in.  Some documents are purposely vague and allow a wide window of interpretation.

I am not comfortable allocating different rates of match on a discretionary basis.  To me, "discretionary match" means it will be made year to year at the Employer's discretion, and that the formula each year is also at the discretion of the ER.  But it's either a uniform match or tiered.  Not a grouping method similar to profit sharing.