A 401(k) plan doesn’t have to be treated like the Bible or any other type of book where every work is analyzed and studied. It can be open and not be as decisive. I believe. The best flexibility for plan sponsors and their providers is opportunities where things are open-ended by being discretionary.
One of the many foul-ups is the stated match formula. There is no reason for that. A plan document needs to have a stated match formula when a discretionary one will do. A matching provision that doesn’t tie the hands of a plan sponsor goes a long way to accomplishing the same goals as a stated match without the drama of having to fix things when the plan sponsor has to amend the stated match when financially, things go south. A stated matching provision ties the hands of plan sponsors when it doesn’t need to and it keeps options open that are closed when a stated match is in the plan.
As a plan participant, I would have liked a matching contribution every time I deferred, but as an ERISA attorney, I like companies that have a flexible discretionary match that could give them the opportunity for the plan sponsor to match at year-end.
