401K Match

Red

We are a manufacturing company with a corporate office and four factories. We have a 401K that currently has no match. Recruiting in the corporate office is difficult without a match. We have been told we can opt to do a match only in the corporate office if we choose but I'm afraid this will stir up a lot of negativity at the factories. Management has said there will never be an across the board match, so it's corporate only or nothing. A match would help recruiting for top positions at corporate. Any ideas on how we can acheive the match without a public relations nightmare at the factories?

Down_the_Middle

Seems to me this is a recruitment tool for you to attract & retain staff at the corp office.

Not sure why an explanation is necessary since this is a compensation issue that pertains to a smaller group of employees, but if it's deemed necessary to explain------------------------ An explanation that includes that this match is part of total compensation will make it more understandable to the others. While they might not agree with this decision I think a clear explanation will help them understand and that's the important piece in rolling out something like this.

RGB

If you have been told that you can discriminate to the benefit of your corporate employees, then I guess you can. Regardless of how you explain it, it will generate ill will among your other employees. I am assuming that your corporate employees are compensated at a higher level than your factory employees. Another problem you will have to deal with is the Highly Compensated Employee (HCE) discrimination test. If your plan fails this test, your corporate HCEs will be limited in their contribution amounts, and may have to be refunded excess contributions.

Instead of trying to accomplish this additional compensation through your 401(k) plan, have you considered revising your compensation levels for these employees? Instead of having an employee relations problem and risking the status of your plan, why not compensate these employees at a higher rate?

Scott Ruth

You will need to consider the IRS nondiscrimination rules if you implement a match for your corporate office only. If there are any highly compensated employees at that location who will be eligible for the match (generally, any 5% owners and any employee who made more than $85,000 last year) it is probable that you will not meet the IRS rules, particularly if there are no highly compensated employees at your factory locations. There may be options (such as excluding highly compensated employees altogether), but that will depend on your specific circumstances. I would seek specific legal advice before implementing a match (or any retirement benefit) for only your corporate division.