Optional Match True-Up

[Lauren0507]

A client whose safe harbor match is based on the pay period and funded each pay period would like to make a true-up this year although it is not required.  The FtWilliam PPA document contained the following language which appears to allow a discretionary true-up:

Notwithstanding the foregoing, after the end of each Plan Year, the Company may make an additional Matching Contribution ("true-up") on behalf of each Participant in the amount of the positive difference, if any, between the Matching Contributions that would have been allocated to his Account had such contributions been determined on the basis of Compensation for the entire Plan Year and the Matching Contributions previously allocated to such Participant's Account.

The Cycle 3 document does not contain this language (at least that I can find) and only addresses required true-ups:

If the Employer funds Matching Contributions more frequently than the determination period indicated in the Adoption Agreement, a true-up contribution will be made to any Participant who did not receive a Matching Contribution based on Matched Employee Contributions or Plan Compensation for the entire determination period indicated in the Adoption Agreement.

Does the absence of language specifically addressing a discretionary true-up preclude the client from making one?  Or, can the language in the document be interpreted as the bare minimum an employer must do, but it does not preclude something more?

Would like to get your thoughts on this.  Thank you.

[Bill Presson]

There may be other parts of the document that you didn't show that would be relevant. You should contact FTW for guidance.

[C. B. Zeller]

For Cycle 3, the IRS required that the plan document explicitly specify the determination period for calculating matching contributions, including safe harbor match. Take a look at item C.18 in the adoption agreement.

If the adoption agreement says the determination period is annual, and the employer calculates and deposits the match each pay period, then a true-up will be required. If the adoption agreement says the determination period is per pay period, then a true up would not be allowed unless the plan were amended, and then the rules for mid-year changes to safe harbor plans would come into play.

If memory serves me right, FT had a FAQ sheet about this back when Cycle 3 came out. It is probably still on their website somewhere. Or I'm sure they would be happy to send it to you if you contact them, as Bill suggested.

[Lauren0507]

Thank you Bill and C.B. for your comments.  C.B. that's exactly what I thought. I have reached out to FtWilliam for assistance as well.  

 

[BG5150]

If you are never unsure what a particular provision in a document means or doesn't mean, ALWAYS check with the document provider first.  They wrote it and support it.  If you are not satisfied with the answer, then consult inside (your company) SMEs.  Thay may dealt with the same issue in the past.  Then consult outside support if needed.