BRF testing

The old different match rates conundrum. Employer wants to keep existing match level for all current employees, but use a lower match rate for all new employees.

Passes current availability testing just fine (for now) but since current employees include ALL of the HC, I don't see any way for this to pass effective availability.

Anyone have any bright ideas on this?

Your threshold for availability on BRFs is the nondiscriminatory classification safe harbor percentage, which is usually fairly low unless you have high HCE concentration, so unless there is a lot of turnover and new entrants compared to existing participants at grandfathered match, this shouldn't be an issue for a while.

http://www.asppa.org/Portals/2/PDFs/2015AnnualHandouts/WS62 - Benefits, Rights and Features Identifying, Testing and Amending.pdf

Thanks, but I'm not worried about current availability - that piece passes just fine. But the effective availability seems problematical. Are you saying that you think effective availability in this situation is ok? None of the new hires will EVER be able to receive the higher match. (Now, if some of the new hires were HC, then I might feel differently.) Thoughts?

FWIW, the rule that the rate of match is considered a BRF troubles me. Matching contributions of course have their own nondiscrimination test -- 401(m). It seems to me that if a plan with different rates of matching contribution passes 401(m). that should be enough. Just my 2 cents worth.

Call your Congressman.

if you call your Congressman/woman, tell him /her that 1.401(a)(4)-4(e)(3)(iii)(G) indicates right to each rate of match is a BRF issue and since the plan already has to pass the ACP test that should be enough and the BRF isn't needed.

And talk to them about the Top Heavy rules, too, and how they are not needed any more...

And if we could get rid of those pesky deadlines....