A plan has a discretionary match formula provision that it has never utilized. May the plan make a matching contribution for this year if it uses the prior year testing method?
Rev. 11/17/06, E-mail Alert 2006-22

Yes . . . but! Since this is not a new plan, the plan may not use the 3% assumption available to new plans (in their first year) using prior year testing. A contribution could be made for NHCEs, if the employer so desires. However, the HCEs in this situation, would not be able to receive a matching allocation, since the prior year NHCE average would be 0%. The plan could change to current year testing — if done before the end of the plan year, but that would require it to use the current year testing method for a minimum of five years.