Match Question 2 - Allocation Compensation

Client would like to allow employees to defer from all compensation, bonuses, etc.  Client wants to match on only base compensation, however.

The match is 100% of the first 3% of compensation deferred.  Since the match would be capped at 3% of base compensation, I'm assuming I have testing issues?

If the allocation compensation passes the compensation ratio test, am I good at that point?

Or do I need to test the match rates for BRF?

Thanks very much.

I'll stab at this one too.

You can use different compensation for match as long as you pass 414(s) testing.

I don't know what your base definition implies.  I really think I do, but based on the Match question 1, maybe the employer is calling some base compensation something as unreasonable.... just to not spend a few dollars on match.

When the employer starts to push up against the 3% match mark, you have to start thinking about safe harbor match..... because for another 1%, testing is off the table (provided no dual entry) and life is good.

Try to keep it simple the best you can. 

Or, if you don't pass 414(s) then I think you can (must) calculate ACP based on a gross compensation or some other 414(s) definition.

As long as it's not an ADP or ACP safe harbor match, there is no requirement that a 414(s) compliant definition of compensation be used to determine the match.  However, for testing, you have to use a 414(s) compliant definition of compensation. 1.414(s)-1(a)(2).

Sorry, questions 1 and 2 are not related.  Just been one of those weeks.

Safe harbor was discussed, but not wanted.  ADP/ACP testing is not an issue.  I suspect the ratio test will also not be an issue as I believe it is mostly HCEs with excluded compensation. 

The main concern in this case is that the definition of compensation for the match is different from the compensation that is allowed for deferrals.

My concern was whether or not a BRF test had to be performed since the difference in the compensation could cause different match rates.  There was a Relius Technical update a few years back that discussed this issue which seemed to indicate that a BRF issue existed, but upon closer reading I see that the issue was also that the base pay failed 414(s).

Thank you for your responses.