Configuration of Employer Match for Safe Harbor 401k Plans

Often times, configuration of employee contribution limits and employer matching contributions is fairly simple and straight forward. For example, an employer matches 50 cents on the dollar of the first 6% of employees’ contributions. In this case, you simply go to Personnel Management > Benefits > Plans > Savings Plans > Define Employer Contribution Rules to set the contribution definition as 50% of the employee contribution with a contribution limit of 3% (50% of 6%) of base salary (after Defining Savings Plan General Data, of course). Then there are cases, such as Safe Harbor 401k plans, that require a bit more creativity. Let’s assume the requirement is to set up a typical Safe Harbor employer match – that is to set up an employer match of 100% of employee contribution up to 3% of base salary, and 50% of employee contribution of the next 2% (Table 1).


Table 1 – Sample Safe Harbor Employer Match Requirement

No single rule will satisfy this requirement. Fortunately, SAP gives you have the ability to apply multiple employer matching rules to employee contributions. Now we just need to identify the combination of rules that will give us the desired result. Since we can’t have one rule for 1%-3% and a different rule for 4%-5%, our two rules must overlap. By creating a rule to address 1%-5% and a separate rule to address 1%-3% we are able to meet the plan requirements. Use the first rule (Figure 1) to set the contribution definition as 50% of the employee contribution with a contribution limit of 2.5%.


Figure 1 – Employer Match Rule 1

Then set the contribution definition as 50% of the employee contribution with a contribution limit of 1.5% for the second rule (Figure 2). To differentiate the rules, simply identify the rule in the Sequence number field.

Figure 2 – Employer Match Rule 2

Notice that our Total Employer Match (Table 2) equals the Employer Match from our initial requirements.


Table 2 – Sample Safe Harbor Employer Match Detail

With this information, you have the tools necessary to configure employer matching rules for some of the more complicated plans. If you encounter the other plans that cannot be addressed by a single rule, you just have to do the math required to define a multiple rule matching contribution.

This entry was posted in Talk Techie to Me. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s