Amending plan for discretionary match

[pixiebear]

We have a client who wants to add a discretionary match to their existing 401(k) plan. They want to make the match on a payroll basis and then do a true up at the end of the year. Do they have to adopt the amendment before the first payroll with the match or can they wait to the end of the year?

[Lou S.]

Assuming the plan doesn't currently allow for discretionary match I would assume they would need to adopt the amendment before they started depositing the matching contributions to the plan but not later than the end of the plan year for the discretionary amendment.

That said, if they did start depositing the match early, I think the eventual amendment would most likely work as a self correction under the newly expanded IRS rules.