401(k) Employer Match Rules/Fine Print

[Penn42]

My 401(k) plan is not offered through my employer, it is offered through my union.  There is no match and at the next union meeting I want to make a proposal to add a "match fund"  as part of to the next contract raise allocation we (i.e. the members) decide on.

I'm thinking it would work something like this (the numbers for this example are fictitious):

- Potential match = 4% up to $6000.
- If all 5000 members were to contribute up to the entire match that would be a gross total of $1.2 million that would need to flow into the fund each year. 
- The contribution to the fund would be on a $/hr basis.  My goal would be to pick a modest enough match that a sufficiently low number of annual hours per person would cover it.  Everybody would be paying for their own match, not anybody else's, and any extra contributions to the match fund in a year would get rolled to the general fund. 
- In this example I'll choose 1500hr/y as a low ball average number and with the chosen match everyone would have to pay $.16/h into the fund.

My question is would this legally count as a match despite only essentially being a longer paper trail from our benefits package to the 401(k)?  I'm going to talk to the trust fund office about this but I thought I'd ask all the many intelligent individuals here as well.

My personal reasons for wanting to suggest this are I want a little extra on top of the limit which would help defray the costs of the plan.  The plan expenses are not horrendous, but they're no VTSAX.  However, I think it would encourage participation in the plan and everybody likes keeping more of their own money, so I think it would be generally favorably accepted.  This is a fresh idea I only had yesterday so I'm not exactly sure how if this makes sense opposed to just allocating those $.16 to the check.  If I am to bring this to a union meeting I want to be well researched and thought out so I'm not wasting everybody's time.

[jacoavluha]

Caveat, I have no idea how unions work.

A 401k plan is a plan adopted by an employer. Are you sure the plan is offered through your union? Are you employed by the union? I have no idea how such arrangements work.

Do you have a summary plan description? This is a typical document that spells out features of the plan. It would say who sponsors the plan.

"Match" or profit sharing contributions are employer contributions. The funds come from the employer. They are a deductible expense of the employer. I don't think the arrangement you propose - where in a roundabout way you're funding your own match - would fly. But I'm just a regular guy who nerds out on investing/retirement/tax stuff.  Certainly not qualified to answer your question.

[Penn42]

The plan is offered through the union.  The name of the plan is "Local XXX Industry Name Here 401(k)".  My specific contractor has nothing to do with it.  At the end of the month my employer sends a lump sum to the union in my name that the union then uses to fund my benefits package which includes my pension, health insurance & didability, 401(k) and such.  My contractor doesn't even have to earmark the money for anything, it's just a lump sum and the union uses my work hours for the prior month to figure out the correct allocation. 

Another little fact of interest, which isn't really pertinent to this discussion, is due to the above process my contributions from the prior month do not hit the account until the 20th of the current month.  Because I am payed weekly that means there's several contributions that are over a month delayed before I actually see them in the plan.  I'm pretty sure a delay like that isn't very common.

[I'm a red panda]

- The contribution to the fund would be on a $/hr basis.  My goal would be to pick a modest enough match that a sufficiently low number of annual hours per person would cover it.  Everybody would be paying for their own match, not anybody else's, and any extra contributions to the match fund in a year would get rolled to the general fund. 

I don't know the answers, but I'm confused. If I'm paying for my own match- what's the point? It's not a match, it's my own money.

[Penn42]

- The contribution to the fund would be on a $/hr basis.  My goal would be to pick a modest enough match that a sufficiently low number of annual hours per person would cover it.  Everybody would be paying for their own match, not anybody else's, and any extra contributions to the match fund in a year would get rolled to the general fund. 

I don't know the answers, but I'm confused. If I'm paying for my own match- what's the point? It's not a match, it's my own money.

In my shoes it'd be money beyond the personal contribution limit.  I'm just unsure how a match would work in my situation other than creating a fund that the membership pays into.  The union would have to come up with the money somehow.  As far as I know there's no way for a contractor to offer a match, should they want to, because they don't have any control over there lump sum.  The union would just see it as an overpayment. 

I'm going to get in contact with the trust fund office this week and see if there's any mechanisms in place for such a thing, though.

[AccidentalMiser]

1. I'm not a lawyer.

2. I think I understand what you're trying to do.  You're trying to pool everyone's money and send  a slice of the pool to each participant to call it a match instead of a contribution.  Is that correct?  Are you trying to get around the $19k (for 2019) limit for contributions by doing this?

3. Even if this would work legally (which I don't think it would), the number of people who would benefit from this in your union is likely vanishingly small and the costs of implementing it to the union would far exceed the benefit to the membership in my opinion.

By all means, give it a shot if you think it's best for you and your brothers and sisters.  Please come back and tell us what happens!