Aggressive Discretionary Matching Formula

If a Plan is giving a 3% Safe Harbor to everyone, could they also augment that with an aggressive discretionary match?  Something to the effect of:

425% of the first 6% of compensation deferred

I've seen someone doing this and it just looks odd to me, so I wanted to confirm it was alright.

Thank you!

In a SF 401(k) To get a free pass on ACP the discretionary needs to met the following 3 conditions -

1-Match is on no more than 6% of deferral (you are OK there)

2-Match does not increase as deferrals increase (also OK there)

3-Can't be more than 4% of pay (you don't meet that one)

That's why in the "triple stacked match" the discretionary match piece is usually something like 2/3rds of  the 1st 6%. I'm sure this is somewhere in the regs on SH match but I don't have a cite handy.

I agree with Lou S that if that's a discretionary match formula it would not meet the SH rules.  I guess I just want to confirm though that the "425% of the first 6% of compensation deferred"  is not the fixed match formula in a triple stack. 

Fixed 425% of first 6 works, but discretionary it doesn't get ACP pass (or t-h exemption). What I'm getting from the first post is they have a discretionary match and SF either match or NE almost no one but the owner deferred and they are looking for a cheap way to max the owner without giving any more to EEs.

So basically if it was a fixed match it's OK, but as a discretionary match it would fail the formula.  It can be done, but up to a maximum of 4% of comp.

And yes, the Plan does have a small eligibility with only the owner deferring.  So if we did go with the Triple Stack Match, would there be an issue with only the owner deferring if it was documented that no one else opted to participate?

A triple stacked match is comprised of:

1. An ADP safe harbor match (e.g., 100% of first 4% deferred)
2. A fixed match (e.g., 100% of deferrals up to 6% of comp)
3. A discretionary match (e.g., 55% of deferrals up to 6% of comp)

The discretionary match is set/adjusted each year to ensure that the target owner/HCE gets to the 415 limit - as the above formula would do.  All contributions are designed satisfy the ADP and ACP safe harbor.  This is a true pay-to-play formula - you get 255% on the first 4% deferred, and just under 200% on 6% deferrals.  Just make sure to document that eligible participants were informed of their right to defer and the formula.

I always wondered why nobody else calls these the red, blue, and yellow matches, just as a way to get other people to understand that the matches are basically concurrent!

Thanks everyone, I really appreciate it.  We've been talking to the prospective client about what they are currently doing and how we'd move forward.

Basically, if they wanted to limit the exposure they can do the 3% Safe Harbor with a discretionary match (66% of the first 6% deferred) as a way to push extra money to the owner (since the ages/service make a Profit Sharing hard to structure).