Interesting Match Formula

We have a client that has a crazy match.

Defer 2% get 300% match (6%)  Defer 4% get 150% match (6%)  Defer 6% get 100% match (6%)

No match on deferrals less than 2%.  If you defer something other that 2,4,6...then match is 100% of deferrals.  No one in the plan defer more than 6% even though they could defer up to 100%.  We think the plan sponsor verbally doesn't allow it.  It is a very small company (45 participants).

It doesn't seem correct.  For BRF, everyone has the ability to defer and receive the match.  Any thoughts?

The match rate may go down as the deferral % goes up. The match rate may not go up as deferrals go up.

So, all is good except for the participants deferring less than 2% of compensation.  Their match rate needs to be at least 300% of deferrals (not necessarily 6% of compensation).

So if you defer 2%, 4% or 6% you get 6% but if you defer 1%, 3% or 5% then you get 0%, 3% or 5%? I agree the RATE of match can go down on the INCREMENTAL deferral increase but not this, where the overall match decreases as deferrals increase.

The plan could have a minimum deferral of 2% so that no one could defer more than zero but less than 2%, could it not? Could not it also require deferral elections in 2% increments so that only 0, 2, 4, 6, etc. were allowed? That would make more sense than what it seems they're doing.

20 hours ago, CuseFan said:

So if you defer 2%, 4% or 6% you get 6% but if you defer 1%, 3% or 5% then you get 0%, 3% or 5%? I agree the RATE of match can go down on the INCREMENTAL deferral increase but not this, where the overall match decreases as deferrals increase.

The plan could have a minimum deferral of 2% so that no one could defer more than zero but less than 2%, could it not? Could not it also require deferral elections in 2% increments so that only 0, 2, 4, 6, etc. were allowed? That would make more sense than what it seems they're doing.

The OP says "If you defer something other that 2,4,6...then match is 100% of deferrals."  If literally true, that would mean if you defer 3% or 5% you get 100%.  Is that true?  If so, then I think you would have an issue of the match rate increasing when going from 3% to 4% (100% to 150%).

agree on that as well.

Yes that appears to be the case for deferrals of 3 and 5%.  Very strange.