ACP 4% non-discretionary match

The plan has 3 employees. The owner and his spouse max their 402g and then an additional employee NHCE who doesn't contribute. The plan is a safe harbor 6% match. 

Since the NHCE employee didn't contribute for 2024. Can we declare a 4% discretionary match for the 2024 year and will the match have to be run through the ACP test? 

Is there anything I'm missing here? 

Yes you can, meets the ACP exemption.

When you say plan is a "SH 6% match," are you saying the match is 100% of deferrals up to 6% compensation?  If so, there may be an issue under §1.401(m)-3(d)(3)

The plan provides a safe harbor match, matching 100% of compensation up to 6%. 

I was referring to if we added a discretionary match, matching 100% of compensation up to 4%. 

From my understanding, you can't provide a match on deferrals that exceeds 6% of comp and pass the ACP test. 

From what I read, I can't do a discretionary match exceeding 4%? Meaning I can't do a discretionary match of 200% on the first 4% of compensation? 

agree with Lou you should be good.

The only thing I might caution is since there is only one NHCE and they are not deferring I think I would caution the client to keep good records that the safe harbor notice was in fact distributed and would encourage them to have an "opt out or 0% election" signed by that NHCE just in case the IRS might question it.

6 hours ago, Bruce1 said:

From what I read, I can't do a discretionary match exceeding 4%? Meaning I can't do a discretionary match of 200% on the first 4% of compensation? 

For the discretionary match to also be ACP SH, like Artie said, it has two independent constraints:

The discretionary match piece cannot match on deferrals on over 6% of plan comp.

Also, the total dollar amount of the match awarded cannot be more than 4% of comp.

So, your discretionary match could be  66 2/3% of deferrals up to 6% of pay.  It satisfies both of those conditions.

Side note:  If they know this NHCE will not ever defer, could they put in a triple stack match for next year to get the HCE up to the 415 limit, or close to it?

6% SH enhance match

4% discretionary match

85% of deferrals up to 6% of pay (or whatever formula works to max them out)

Remember, only the discretionary match has the cap of 4% in dollars.  The company cannot match on deferrals above 6% of pay in any of the tiers and stay SH compliant.

Another issue, based on your (Bruce1) original facts, the client wants to put the match in for the prior year.  The only times we have utilized this type of match (including a triple stack) is when we had it in place at the beginning of the year, not after year end.  I am not quickly finding any authority for this position... maybe just us being conservative.

17 hours ago, BG5150 said:

85% of deferrals up to 6% of pay (or whatever formula works to max them out)

Do you have a link so I can do more research on the triple-stack match? 

@Artie M I'll look into how we can declare the discretionary match. I assume that since the match is discretionary, we can declare and fund the match after the year-end. 

19 hours ago, Lou S. said:

"opt out or 0% election"

We have a signed deferral election form to cover our bases. 

On 1/31/2025 at 9:13 AM, Bruce1 said:

Do you have a link so I can do more research on the triple-stack match? 

I don't have a link, but I'm sure there's a bunch of stuff out there.  This is a boutique type of calculation, I would consult with your TPA or bundled service provider..

https://ferenczylaw.com/the-triple-stack-match-its-not-just-for-pancakes-anymore-autumn-2015/