Triple Stack Match

I have a prospect who is interested in a triple stack match.  Owner, spouse, and adult child with two additional employees where neither wants to participate - which is insane in this scenario, but I digress.  Company is a S Corporation so the owner and family members keep their W-2 wages well below the 401(a)(17) limit - they are around $125k each.  I think I have this correct but I really hope someone is more comfortable with this than I am.  I believe they can each get a match equal to 16% of their $125k W-2:

Stack 1 - enhanced safe harbor match 100% up to 6%

Stack 2 - discretionary match 100% up to 4% (I know this can be structured differently but no need in this scenario)

Stack 3 - fixed match 100% up to 6%

Everything I've read on other posts and in literature only refers to the standard safe harbor match formula and assumes the owners have the maximum 401(a)(17) comp.  I hope those of you with more experience with the triple stack match can help me out here.  Does this stacked formula, giving participants a 16% match if they contribute 6% of pay, still safe harbor?

I believe your Stack 1 should be limited to 4%.

Thank you Alex but do you have anything supporting that position?  Everything that I have read simply states the formula for the first "Safe Harbor" stack has to meet the basic safe harbor or an enhanced safe harbor.  Using 100% up to 6% in the first stack still satisfies the enhanced safe harbor. The discretionary matching must be limited to 4% to satisfy the ACP safe harbor but based on my reading (which admittedly could be wrong) 100% up to 6% in the "Safe Harbor" stack and the "Fixed Match" stack could both be 100% up to 6%.

If you want to get the match even higher, I think the third tier could be, say, 300% up to 6%.

Tier 1:  6% of $125,000 = $7,500

Tier 2:  4% of $125,000 = $5,000

Tier 3:  300% of 6% = $22,500

Total Match:  $35,000

You would have to watch out for deducibility, but the match is only 28% of pay.

BG5150 - I didn't realize the "Fixed Match" tier could go that high. I thought the 6% of compensation was the maximum the match could equal - not the maximum that could be matched.  Thank you for that input.

That's at lease what I recall.  I could be wrong.  I'll let someone else chime in on that.

PS:  If I'm right, the the match can be even higher to get them to the 415 limit.  Again, watch the deductibility limit.  And watch out the staff doesn't wise up and reap a huge match.

BG5150 - I think you are correct and I misread the information I had. This is an excerpt from a presentation by Wolters Kluwer on the topic that supports what you stated:

"Mandatory (fixed) matching contributions may not be made on deferrals in excess of 6% of compensation."

1) The 1st stack is the same as in a regular safe Harbor match plan.  I.e., the basic match of 100% of first 3% deferral plus 50% of the next 2% for a max of 4%.  Alternatively you can use an enhanced formula of 100% of first 4% deferral and again the max match is 4%.

2) Your other stack maximums are fine: max Fixed match can max out at 6% and optional max maxes out at 4%.
3) I can try and get you something written later but currently answering this while in cpe.

11 minutes ago, Alex said:

1) The 1st stack is the same as in a regular safe Harbor match plan.  I.e., the basic match of 100% of first 3% deferral plus 50% of the next 2% for a max of 4%.  Alternatively you can use an enhanced formula of 100% of first 4% deferral and again the max match is 4%.

 

4% isn't the maximum. You can do 100% up to 6% and still satisfy the ADP/ACP requirements.

I stand corrected and my apologies!

9 minutes ago, Alex said:

I stand corrected and my apologies!

Post enough on here and it's gonna happen. BTDT.

I really appreciate everyone's input.  No matter how long we do this there will always be something new to learn.