100% match coupled with a SH match

Client wants to match his employees deferrals dollar for dollar.  He needs to entice people to work for him.  In addition we need to build into this formula a SH match as well.  Can this be done?   Say 4% SH match + what... 100% company match over 4%?   Is it that easy?  (that just came to me)

The safe harbor match rules limit how much you can apply the match to (i.e. deferrals past 6% of pay) so I don't think it would work fully.

Depends upon what they are really trying to do, and how they want to structure it, coupled with how much they want to spend. They could, for example, have an enhanced safe harbor match of, say, 200%, or even more,  of the first 6%. Something like that would, to me, seem like a pretty powerful incentive. But it might not suit the employer's needs/budget. A cross tested PS formula, depending upon census, can work wonders, although in this case, a nonelective safe harbor (regular or enhanced) might be a better option, as the safe harbor nonelective can be used toward satisfying Gateway, whereas the SH match cannot.

I 100% agree with you.  I showed them the advantage of the cross tested plan with a SH NEC and it worked out well.  But the requirement to give the SH NEC to all eligible employees, not just the ones deferring, didn't sit well.  

What about my thought in my original post.  Give everyone the SH match.  Then give them a company match with a formula of 100% of all deferrals above the safe harbor.  No?

Well, again, it depends. As Bri said, can't match on deferrals in excess of 6%, and the maximum discretionary match is 4% of compensation, so unless what they want fits into this, it might not suit what they want. Of course, if you want go beyond this and want to ACP test, then that's perhaps a different story.

To retain safe harbor status your Safe Harbor Match could be 100% on the 1st 6% deferred.  You could then do a discretionary match on top of that that does not apply to deferrals over 6% of pay, and the value of that match can't exceed 4% of pay.  So you could do 100% on the 1st 6% plus 66.666% of the 1st 6% of pay (4/6), or 100% on the 1st 4% of pay.  You can not do the Safe Harbor Match of 100% of 4% pay, plus 100% of deferrals over 4%.

On 6/21/2023 at 10:27 AM, K-t-F said:

I 100% agree with you.  I showed them the advantage of the cross tested plan with a SH NEC and it worked out well.  But the requirement to give the SH NEC to all eligible employees, not just the ones deferring, didn't sit well.  

What about my thought in my original post.  Give everyone the SH match.  Then give them a company match with a formula of 100% of all deferrals above the safe harbor.  No?

No

Another thing to keep in mind here is that if the match is 100%, uncapped....you might not have a problem with the ACP test.  At least not if the owner's at max pay anyway so that his match rate ends up only around 6.82%

In the OP,

On 6/20/2023 at 2:15 PM, K-t-F said:

He needs to entice people to work for him

and then the discussion has been all about match formulas.  A match is an enticement to encourage employees to contribute to the plan.  If the goal truly is to entice people to work for him, then a juiced up match is not likely going to achieve that result.

Consider having a conversation to confirm the objective, and if it truly is to provide a work incentive then explore a profit-sharing contribution.  If the work force is generally lower paid, giving everyone who is eligible a small, flat-dollar amount initial contribution and an allocation of a percentage of profits gets them into the plan and focuses on the message that work pays off.  The allocation period can be more frequently than annual if the company really wants to push the message.  The profit sharing contribution can have a vesting schedule to hold down cost if there is high turnover.

The company can still add a basic safe harbor match for those who wish to defer.

6 hours ago, Bri said:

Another thing to keep in mind here is that if the match is 100%, uncapped....you might not have a problem with the ACP test.  At least not if the owner's at max pay anyway so that his match rate ends up only around 6.82%

Safe Harbor Match is capped.  Maximum is 6% of pay.  Discretionary, which is allowed under Safe Harbor Rules is capped at 4% total or against 6% of pay deferred, and is NOT subject to ACP testing so as long as limits are employed ACP testing is not an issue.

Perhaps I misread your comment.  If you are saying do Safe Harbor Match with a Discretionary Match that is uncapped, then yes you are correct.  To stay under Safe Harbor the limits must be applied.

Exactly, which is why the "100% uncapped" match won't pass the ACP safe harbor.  My point was that passing the ACP test if necessary might not be that difficult, if the owner's pay makes his own match amount a relatively low percentage.

On 6/20/2023 at 2:15 PM, K-t-F said:

He needs to entice people to work for him.

Has anyone talked with him about his overall benefits package?

On 6/23/2023 at 9:43 AM, Paul I said:

and then the discussion has been all about match formulas.  A match is an enticement to encourage employees to contribute to the plan.  If the goal truly is to entice people to work for him, then a juiced up match is not likely going to achieve that result.

Amen. When I saw that he didn't want to do the SHNE I wondered about the goal.