Safe Harbor Match + Discretionary Match... can the discretionary match be made after the SH Match?

Hi Everyone,

I have a client who offers an enhanced SH Match ($1 for $1 on the first 4%).  They then stack a discretionary match on top of that ($1 for $1 on the next 2%).  It almost works like a two-tiered match, but it's the same $1 for $1 formula.  Ascensus is now telling them they can't do that.  Ascensus is saying that the discretionary match must be made on the first 2% of deferrals, meaning if someone defers 1%, they get the 1% SH match and 1% discretionary match.

Here's what we've been told:  The 4 and the 2 are not added together. If an employee defers 4%, they get the full 4% Safe Harbor Match and the 2% Employer Match. If an employee defers 1%, they get 1% Safe Harbor Match and 1% Employer Match. If an employee contributes 6% they get the 4% Safe Harbor Match and the 2% Employer Match. If they defer 7% or above, they get the 4% Safe Harbor Match and the 2% Employer Match.

Is that right?  The plan sponsor is not allowed to choose to match percents 5 and 6 only on a discretionary basis?

Any help is appreciated!

Ascensus is correct. 

Without seeing the plan document, I agree that Ascensus is probably correct (especially if its their document).

That said, if the document allows for a truly discretionary match, you could make the match 0% on the first 4% deferred, and 100% on the next 2% deferred.  You would need to BRF and ACP test it, but its possible.

If you have a tiered match, it has to decrease as the tier increases so matching the first 4% at 0 and then the next 2% at any rate is not allowed.

24 minutes ago, Kac1214 said:

If you have a tiered match, it has to decrease as the tier increases so matching the first 4% at 0 and then the next 2% at any rate is not allowed.

If you are intending to keep the discretionary match under the safe harbor rules, yes.  Otherwise I agree with RBG.