Safe Harbor - Controlled Group

[52626]

All members of the controlled group participate in the plan. Safe Harbor Match equal to 100% up to 4%

some of the participating employers want to increase their match to 100% up to 6%.  Is this even possible?  Don't all participating members have to use the same safe harbor formula?

Guessing they could elect a discretionary match for a specific group of employees, assuming it is below 4% and still remain safe harbor.  However, allocating a discretionary to only a small group of employees would require additional converge testing - correct??

[CuseFan]

As a control group all participating employers are deemed a single employer so I do not think a different formula for one or more employers works. Also, I think that any discretionary match must preclude the possibility that any HCE could get a higher rate of match compared to any like NHCE (i.e., one who defers the same percentage), which would prohibit participating employer(s) from having their separate discretionary matches unless such employer(s) have only NHCEs. If I'm wrong on any of this, I hope one of my esteemed and more knowledgeable colleagues with respect to this subject matter will set us straight.

[Paul I]

I think CuseFan is on target. Assuming the plan is not a Safe Harbor, it is worth highlighting the clarification that separate discretionary matches could work if no HCE can get a higher rate of match compared to any like NHCE.  Conceivably, the plan could exclude HCEs from any match and then allow different groups of NHCEs to have differing match levels.  A company may wish to do this if it wishes to reward different locations/profit centers/classifications based on performance or profitability.  (I wouldn't want to risk the Safe Harbor with this approach.)

A little bit more aggressive approach would be to limit HCEs to the lowest match rate among all of the match rates for any NHCEs.  This may allow the HCEs to get some match but still get by coverage and nondiscrimination tests.  (It likely would make sense for the HCE match to be made no more frequently than annually.) 

If the plan then allows for after-tax contributions, there likely will be room in the ACP test to let HCEs take advantage of this opportunity.

Like CuseFan, I invite any insights on potential barriers to this approach or to any likely points of operational failure.