Rigid match not funded correctly

[Tom]

Plan sponsor wanted a plan that provided a 1% match to HCEs and a higher match to NHCEs.  The match is calculated each pay period with the plan sponsor setting the match in with their payroll service provider at the beginning of the year.  This provision is obviously problematic as employees might move from HCE back to NHCE and vice versa and from an HRA standpoint is not very employee-friendly.  I should add they have many well paid employees who however over and under the HCE threshold each year and are not owners.

So for 2025 we see a couple HCEs who received more match than they should have.  The match is discretionary but rigid and so the notice goes out.  Seems we would transfer the excess match along with earnings from the participant's account to the plan's unallocated cash account.  So there would e no distribution to the participant nor 1099-R.

Thank you,

Tom

[Tom]

HR standpoint - not HRA

[Peter Gulia]

If the employer has enough money:

Might the plan’s sponsor amend, with retroactive effect, the plan so all participants get for 2025 the same higher matching contribution—what had been provided only for nonhighly-compensated employees?

BenefitsLink mavens, would this be feasible or infeasible?