True-up Timing - BRF Issue?

Assume a plan calculates the employer match on a plan year basis, but the employer funds per-pay period with a year-end true-up.  Could the plan be amended to provide that, if an employee hits the 401(a)(17) limit before the end of the year, the true-up amount for the employee will be funded at that time, rather than waiting until year-end?  I'm wondering if the timing of the true-up is potentially a BRF issue, given that it would be virtually all HCEs who would get the contribution early (and get the opportunity for additional earnings).  Of course, there's always the potential for additional losses as well. 

As always, I appreciate the collective wisdom of the group. 

Yes, I think it could.

FWIW, our Cycle P3 nonstandardized pre-approved language says: "After the end of the plan year, and from time to time during the plan year in the employer's discretion, the matching contributions will be recalculated, using compensation for the plan year, and any additional amount due as a result of the recalculation will be contributed as soon as practicable after the recalculation." 

I understand your concern, but since employer contributions may be made during or after the end of the plan year, I don't know why matching contributions would be any different. 

I think there could be a BRF issue.  A right or feature is essentially a catchall that the IRS can apply to any feature that is different for one group of participants than another.  The IRS excludes from rights or features any feature that has no meaningful value to participants.  That seems to imply that if there is meaningful value to a right or feature to a participant that c/would be a right or feature that needs to be tested.  Here, an early contribution arguably has value because someone would get investment returns for a longer period than someone who got the later contribution.  I mean that is why most participants who load up deferrals early (even if there is no match) do so.  Though you point to losses, the IRS will have the issue with the potential for earnings.  Different groups having different investments is definitely subject to BRF testing.  Doesn't seem like a stretch that allowing different groups to invest amounts earlier than another could also be problematic.

I also note that EBP's document makes no reference to one group versus another.  That document simply recalculates for all participants, no matter how much the participant makes--there is nothing in it that refers to two different groups.  Under EBP's document there is a true up for everyone who qualifies for one at the time the employer makes the recalculation.  The proposed change differentiates between two groups of participants so that at a point of recalculation some participant who might otherwise qualify for a true up will not get one (until a later date of recalculation).

As you state, it seems especially problematic because depending on the HCE definition and demographics it will in all likelihood favor HCEs.

I'm surprised that, despite flying cars, we still don't have match calculators that will roll up the aggregate on the fly?  So that every pay period determines the aggregate match due so far and trues up as needed every time.

I mean, I used it in Relius 15 years ago, so kinda figured every payroll company should be able to do this by now.

1 hour ago, Bri said:

I mean, I used it in Relius 15 years ago, so kinda figured every payroll company should be able to do this by now.

As with many services/providers, some are excellent, some couldn't be trusted to - well, never mind. I think there are certain payroll companies that generally handle things well, yet fall short on the qualified plan end of things...and to be fair, sometimes the clients make life difficult for the payroll companies, similar to what we sometimes have to deal with...

We've never actually received a request for something like this. Is it a common request/procedure? Just curious.

A plan provision like @EBP notes a provision would work if the true-up is run for everyone at the same time.  If the current plan provision specifies that the true up is done at or after year end, then it would require an amendment to permit it to be calculated earlier.  The problem comes in with calculating the true up early only when a participant reaches the comp limit.  Here are some issues:

• As  @BTG and @Artie M note is the early true up likely it will be discriminatory.  
• The true up would need to be calculated after each payroll in which a participant reached the limit. 
• A procedure would have to be in place to address the situation where a participant reaches the limit in a pay period, but a subsequent payroll adjustment would drop the participant's year-to-date comp below the limit.
• The plan should not have any allocation conditions that would have precluded a participant from getting a true up come plan year end (such as a last-day rule or an minimum hours requirement.)

This is the type of plan "enhancement" that leads to operational errors, and at some point in time in the future, successor people in HR, payroll and at the TPA are asking who decided that this was a good idea?