ACP Safe Harbor Plan

Business owner only contributes 5% of pay.  If I do an 80% match on the first 6% of pay (plan uses Rigid Discretionary, so 6% is hard-coded), the owner gets a match of 4% of pay (80% of the 5% he contributes). There are a couple of participants who contributed 6% of pay or more.  Am I prohibitted from using a match of 80% of the first 6% OR a, I simply required to impose a cap on the NHCE's of 4%?

I can't believe I've never seen this scenario before!

Is 80% of the first 6% a fixed match in the Plan document? If yes, you are fine.

If it is a discretionary match where they are declaring 80% of the first 6% then I think you have an ACP test as the discretionary match can exceed 4% of pay.

I know but the question is does the cap operate to cap individuals at 4% OR does it preclude the match formula from being more than 66.66% of 6%?  This is the language in my Adoption Agreement (Corbel 401k Non-Standardized):

If the "ACP test safe harbor" provisions are being used (i.e., Question 28.b. is selected), then the Plan will only take into account Elective Deferrals up to 6% of Compensation in applying the matching contribution set forth below and the maximum discretionary matching contribution that may be made on behalf of any Participant is 4% of Compensation.

Honestly thins language to me says I can do an 80% of 6% match as long as I cap each individual at 4%.  

I think you can do it with the 4% cap.  But you are not really matching 80% of the first 6% in that case. I don't see why you don't just communicate the match as 80% of the first 5% because that's what you are actually doing in this case and you would be withing the rules.

But you are not really matching 80% of the first 6% in that case.  I am matching 80% on the first 6%. The owner contribute 5%, so 80% of his 5% is 4%,

I don't see why you don't just communicate the match as 80% of the first 5% because that's what you are actually doing in this case and you would be withing the rules.  Because the document is Rigid Discretionary and has 6% hard-coded.

Thoughts?

While technically correct, I think it is misleading to folks who sign up thinking they are going to get 80% of the first 6% which is a 4.8% match when they are getting capped at 4% which effectively is 80% of the first 5% and 0% from 5 to 6. It just seem like catching folks in the small print. It guess it comes down to how you communicate it to participants.

Well they have a 100% of 4% safe harbor match.  And then an additional 4%.  That's a stellar 8% and I don't have to tell you that's a heck of an employee benefit.  So if the owner can get a few thousand bucks more legally by applying the 4% as a cap, they're not going to sweat the possible confusion for their 6 employees (in this case only one of whom would be capped).

Anyway thats where this idea and logic is coming from...  Not sure if it changes your view of the situation.

Also the match is indeed discretionary on the first 6% of pay contributed.