Matching Contributions With Monthly Plan Entry

I'm taking over a client and this is the first year I'm operating as the TPA.  They do a match, which is funded after the end of the year.

Deferrals are allowed immediately

Matching Contributions, you become eligible 1st of the month following the completion of 1 year of service.

Currently the Plan does not exclude compensation prior to becoming eligible for the Match.  It appears that the previous TPA was matching all deferrals made during the year, as long as the participant became eligible at some point during the year (for example, if someone became eligible on 12/1 all of their deferrals would've been matched up to what the formula allows).

My question is if that is allowed?  Or are they only allowed to match deferrals made after they would've become eligible for the match?

Sure it's allowed. In fact if the Plan Document says comp is not limited to when they are a participant, not only is allowed, it's required.

6 minutes ago, Lou S. said:

Sure it's allowed. In fact if the Plan Document says comp is not limited to when they are a participant, not only is allowed, it's required.

That's what I thought, I just had a moment though that if the money was deferred prior to becoming eligible those deferrals should be excluded.

Thanks for the reassurance!

On 8/17/2023 at 1:45 PM, Lou S. said:

Sure it's allowed. In fact if the Plan Document says comp is not limited to when they are a participant, not only is allowed, it's required.

You also need to check how often the match is calculated.

Just because they deposit it once a year doesn't mean the match is calculated on an annual basis.  (Just like if the ER deposits the match every pay period, it doesn't mean the match is calculated on a per-pay basis.)