Controlled Group - Additional Matching for One Division?

Hi All,

Saw a thread on here about 20 years old but curious if the theory still holds up.

Company has 4 divisions, A, B, C, and D under 401(k)(13) safe harbor plan. All divisions receive the QACA safe harbor match. Company wants to make only Division D eligible for an additional/enhanced match.

Can this be done?

If Division D passes 410(b) on its own, the benefit passes 401(a)(4) inside of Division D, and the benefit passes 401(m) inside Division D, is this allowable with a plan/spd amendment?

Any other concerns or things I'm missing (i.e. does a test need to be for the controlled group as a whole vs just division d)?

Thank you in advance!

Are there any HCEs in D? I'm not sure about QACA SHM, but in regular SHM you can't have an additional match where any HCE can, by design, get a higher rate of match than any NHCE. I also don't think you can restructure D out like that, but I'm not sure. If D was all NHCEs I think you'd be OK regardless.

I think you would need to have division D in a separate plan and make sure both plans would pass 410(b) on their own.  Others here will be able to verify.

@CuseFan, I think that's right and the HCE was the part that was tripping us up. Either the entire matching scheme will need to pass as a NSH or only offer to NHCEs.

Thank you.