![]() Unless you have a really unusual safe harbor match formula, the safe harbor match should be determined using the amount of the participant's deferrals and his/her safe harbor compensation. ![]() The cited restriction on HCE match in 1.401(k)-3(c)(4) compares the possible rates of match (match / deferrals) for HCEs and NHCEs who defer the same percentage of safe harbor compensation. There are other requirements for restrictions on the amount NHCEs can defer in the other parts of 1.401(k)-3(c)(6). ![]() So, it is possible to have the compensation definition for deferrals be different than the safe harbor compensation definition used to determine the safe harbor match. Thus, the definition of compensation from which elective contributions may be made is not required to satisfy the nondiscrimination requirement of §1.414(s)-1(d)(3). A plan may limit the types of compensation that may be deferred by an eligible employee under a plan, provided that each eligible NHCE is permitted to make elective contributions under a definition of compensation that would be a reasonable definition of compensation within the meaning of §1.414(s)-1(d)(2). Again, the compensation test would have to pass, though.ġ.401(k)-3(c)(6)(iv) Restrictions on types of compensation that may be deferred. As long as all the match calculations are done this way, you haven't violated the Regulation. If the plan uses a basic safe harbor match, he would receive a match of $1,950. However, to determine his match, you would have to assume his deferral % is 3.5% ($2,100/$60,000). For example: if an employee is paid $60,000 plus a $10,000 bonus, and he elects to defer 3% to the plan, his deferral would be $2,100 (3% of $70,000). In a situation where employees are allowed to defer on a bonus payment but the matching contribution is NOT being calculated on the bonus payment, the only way that the Regulation will be satisfied is if the match for all participants is determined by first determining the employee's deferral % for purposes of the matching formula by excluding the bonus (even though the employee deferred on the bonus). I think it would be permissible to exclude bonuses from the match calculation to the extent that the 414(s) compensation test can be passed (which may be problematic). 1.401(k)-3(c)(4) is getting at is that the rate of match for the HCEs cannot be greater than the rate of match for the nonHCEs. There would need to be some kind of mid year true-up after the bonus was paid to make sure those deferrals were taken into account for purposes of match. But administratively this would be difficult with a payroll period match and no true-up. The only way I could see this as allowable is if you only look at match eligible compensation when determining match percentage and you completely ignore deferral compensation. I'm worried that the match for an NHCE could be lower than the match for an HCE when compared to deferral eligible compensation. I'm leaning strongly towards no on this but haven't found anything that specifically excludes this design. In addition, the plan pays match on a payroll period basis and does not provide a true-up. Specifically, they want to know if the definition of compensation for employee deferrals can include bonus but exclude bonus for match eligible compensation. Someone is asking if a traditional match safe harbor plan can have different definitions of compensation for employee deferrals and employer match.
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