401k plan has a matching formula based on compensation. Participants earning up to $40,000 receive 100% match on their salary deferrals, paticipants earning more than $40,000 receive 50% match on their salary deferral. Is there additional testing other than the ACP test on the match since it isn't a uniform formula?? Thanks.

Yes, Benefits, Rights, & Features. This structure has been designed to ensure the plan passes this test as they provide the lower rate of matching contributions to those with incomes above $40,000. Unless you have a substantial number of HCEs for the year with incomes less than $40,000, you should be fine.

Also, you have to ensure a high enough percentage of individuals below $40,000 actually receive the 100% matching in order to for the rate to be valid. This is a 'bottom up' type feature designed to boost ACP percentages of the lower paid in order to help the test. It's a creative design that should work. I wouldn't imagine you would have a problem.

Having a substantial number of HCEs earning less than $40,000 is sometimes found in a new start up company's early years, but it is a concern to make sure does not exist in any situation with the bottom-loaded tier.

Thanks for the response, and just to be clear, what about 410(b) and 401(a)(4) testing??? Thanks again.

401(a)(4) testing breaks into three components: contributions, BRFs, and timing of amendments and termination. As for contributions, since these are matching contributions, the ACP test handles that. You do not have an amendment/termination timing issue. That leaves BRF testing which has been the subject of some of the responses already posted in the thread.

410(b) minimum coverage may be satisfied either by ratio percentage or average benefit percentage tests. The two-tiers for the match should not, of itself, complicate your ratio percentage testing.