I am reviewing a potential customer's calculation and they have the basic SH match/100% first 3%/50% next 2%. If someone contributed 4%, they obviously should have a match of 3.5%. However, they are rounding the deferral percentages to whole percentages. To me, if someone contributed 3.3%, they should get a match of 3.15%, but they are only giving 3% as a match. How many decimal places do you go out? I have never run into this before.

Get the legal opinion they must have obtained to do that. Yeah sure. They are wrong, and if they ask you to prove it, have them call EBSA or IRS to see if what they are doing is wrong.

Its cases like this that makes me wish for an anonymous reporting capability.

Agreed. I hope it is a self-run plan...actually I don't know what to hope for.

Before searching for legal opinion, consider that it may just be sloppy. Someone may have set a "rounding parameter" somewhere, but did so incorrectly, and then proceeded without checking.

The computer has lots of decimal places, and we don't round them off...for the percentage anyway. We do round the match amount to two decimal places.

If one were to round the percentage, I'd recommend keeping all the decimal places that affect the match amount.

Why round the percentage? Why not calculate the actual match money based on the schedule and round that to the penny?

Actually, that is what I do. I was just looking at what the other company had done and was a bit caught offguard. Another example, if someone contributed 4.55%, they rounded this to 5% and gave a 4% match. Not good.

Have you asked specifically how they calc the match? Do you have their actual worksheet or do you only have the results and are reviewing them? If they calc by the payperiod and don't have a true-up, then it is possible that a person contribute higher in one period and lower in another and the result be less than optimal. But if it's a year end calc or they have a true-up, then your analysis is probably right.

Mathematically, a per pay period match cannot create a higher match than an annual calculation, so that thought can go right out the window since in her example you quoted the person received a higher match.

Well, almost ...
for example, weekly matches at 4% on say $499.90 gives a match of $20/week,
then for the year, income is $25,994.80, of which 4% is $1,039.79,
and the total of the weekly matches is $1,040.

But generally, it works out as you say.