December 2012 Archives

December 27, 2012

Employee Benefits-IRS Provides Guidance On Employer Contributions To SIMPLE IRA Plans

In Retirement News for Employers (Fall 2012 Edition, December 13, 2012), the Internal Revenue Service ("IRS") discusses employer contributions to SIMPLE IRA Plans. Here is what the IRS said:
The only employer contribution you can make to your SIMPLE IRA Plan (for each participant) is either:
• a matching contribution capped at 3% of compensation, or
• a 2% nonelective contribution.
You can't make both.

Matching Contributions. You can choose to make a matching contribution for each employee's salary deferrals on a dollar-for-dollar basis up to 3% of the employee's compensation. In this instance, compensation is not limited by the annual compensation limit, but you can't exceed the 3% cap.

Less than 3% match - You can reduce the 3% matching contribution for a particular year, but only if:
• you don't reduce it below 1%, and
• you don't reduce it more than twice in the 5-year period ending with that year.

2% Nonelective Contribution. Instead of the matching contribution, you can choose to contribute 2% of each eligible employee's compensation regardless of whether or how much the employee defers. For nonelective contributions, an employee's compensation is limited to the annual compensation limit ($250,000 in 2012 and $255,000 in 2013).

Notice. You must annually:
• choose whether to make:
• the matching contribution (and the match limit), or
• the nonelective contribution, and
• notify all employees of your choice before the election period.
Regardless of your business structure, you must use the same contribution formula for all employees (including yourself).

Changing The Contribution Type Or Percentage. You can't amend or terminate a SIMPLE IRA plan mid-year. Once you've notified your employees of the type and percentage of employer contributions you'll make for a year, you can't change your mind. For example, if you notify your employees you'll make the 2% nonelective contribution for the upcoming year, you can't then decide to make the 3% matching contribution for that year. Likewise, if you've notified your employees that you'll make the matching contribution with a 3% cap, you can't reduce the cap to 2%.

December 26, 2012

Employment-First Circuit Rules That Obtaining A License Is An Essential Job Function For ADA Purposes

In Jones v. Nationwide Life Insurance Company, No. 12-1414 (1st Cir. 2012), the plaintiff, Mark Jones ("Jones"), was appealing the district court's summary judgment for his employer, Nationwide Life Insurance Company ("Nationwide"), in his suit claiming discrimination under the Americans with Disabilities Act (the "ADA") and State disability law.

In this case, Jones had repeatedly failed to pass an examination to receive a license to become an investment advisor representative required by Nationwide of all persons in Jones' position, by a date of which he had many months' notice. Eventually, he requested that the date be extended due to his medical condition. When Nationwide declined, and Jones declined to pursue an open alternate position at lesser pay, his employment was terminated by Nationwide for failure to have the required license. This suit ensued.

In analyzing the case, the First Circuit Court of Appeals (the "Court") noted that one element of a prima facie case of discrimination under the ADA and the applicable State law is that the plaintiff is qualified to perform the essential functions of his job, with or without a reasonable accommodation. Here the Court ruled that obtaining the license was an essential function of Jones' job. This resulted because Nationwide indisputably characterized obtaining the license as an essential function of Jones' job, referring to the license as a condition of employment and indicating that the failure to obtain the license could result in job termination. All Nationwide employees with the same job as Jones had obtained the license.

The Court said that elimination of an essential job function-such as the need to obtain a license-is not a reasonable accommodation. Further, Jones' request for an extension of time to get the license is not a reasonable accommodation. The request did not detail how any purported disability affected his ability to pass the exam and obtain the license, and in any event it was made too late and did not establish any basis for concluding that it would help Jones pass the exam. The Court concluded that, since Jones could not pass the test to acquire the license, he could not perform his job's essential functions, and there was no reasonable accommodation to help him. As such, the Court ruled that Jones' could not make out a prima facie case for discrimination under the ADA and State disability law, so that his claim in this case fails. Accordingly, the Court affirmed the district court's summary judgment in Nationwide's favor.



December 19, 2012

ERISA-Seventh Circuit Upholds District Court's Award Of Statutory Penalties For Failure To Timely Provide Plan Documents

In Mondry v. American Family Mutual Insurance Company, Nos. 10-3409 and 11-1750 (7th Cir. 2012), the plaintiff, Sharon Mondry ("Mondry"), was appealing the amount of the statutory penalties granted to her by the district court. In this case, after obtaining benefits from her employer's group health plan (the "Plan")-in the form of reimbursement for the cost of her son's speech therapy-Mondry had brought suit against her employer, American Family Mutual Insurance Company ("American Family"), under section 104(b)(4) of ERISA for the failure to produce documents relevant to the Plan benefits within 30 days of her request. The district court had awarded Mondry statutory penalties of $9,270 on her claim.

In analyzing the case, the Seventh Circuit Court of Appeals (the "Court") noted that the district court had awarded Mondry penalties of $30 per day for delays totaling 309 days in producing two documents, which were subject to section 104(b)(4) production because they were interpretive documents. Here, the 309 day period had begun 30 days after Mondry specifically requested those particular documents. The Court also noted that the district court granted no damages for the failure to produce a third document, since the district court had found that Mondry never requested it. The Court found no error or abuse of discretion in the amount of the statutory penalties awarded by the district court, and thus affirmed the district court's award.

December 18, 2012

ERISA-Eighth Circuit Rules That Plaintiff Failed To Make Out A Prima Facie Claim Of Retaliation Under ERISA Or FLSA

In Shrable v. Eaton Corporation, No. 12-1404 (8th Cir. 2012), the plaintiff, Donald Shrable ("Shrable"), had been terminated by his employer, Eaton Corporation ("Eaton"), in July 2009 after receiving three formal written warnings about his job performance and conduct. Shrable then filed this suit under ERISA and the FLSA, alleging that Eaton had retaliated against him after he raised certain complaints protected by those statutes. The district court granted summary judgment in favor of Eaton, and Shrable appealed.

In analyzing the case, the Eighth Circuit Court of Appeals (the "Court") noted that section 510 of ERISA-the basis of the ERISA retaliation claim- makes it unlawful to discharge, fine, suspend, expel, discipline, or discriminate against a participant for exercising any right to which he is entitled under the provisions of an employee benefit plan. The Court said that, to make out a prima facie case of retaliation under section 510 (and avoid adverse summary judgment), Shrable must prove that he participated in a statutorily protected activity, he experienced an adverse employment action, and a causal connection existed between the two. Shrable claims he engaged in a statutorily protected activity, by complaining about the company's 401(k) plan in January of 2009. However, the Court found that Shrable did not participate in any such activity, since the record appears to show that he did not, in fact, make any such complaint. Further, Shrable fails to demonstrate a causal connection between his supposed comments in January, 2009, and his termination in July. The Court said that it doubts whether a plaintiff may establish a prima facie case of retaliation when the termination of his employment occurs six months after the alleged protected activity. As such, the Court concluded that Shrable has failed to make out a prima facie case of retaliation under ERISA.

Next, the Court noted that the FLSA makes it unlawful for an employer to discharge or in any other manner discriminate against any employee because such employee has filed any complaint under or related to the FLSA (see 29 U.S.C. § 215(a)(3)). It said that, to make out a prima facie case of retaliation under FLSA, Shrable must show the same three elements required for his ERISA claim. Here, Shrable contends that he was terminated for complaining, again in January, 2009, about the company's elimination of a half hour of paid lunch, which related to the FLSA because it would affect overtime. However, the Court said that bona fide meal periods are not work time, and thus the elimination of a half hour of paid lunch would have no effect on overtime or any FLSA requirements. Further, Shrable has failed show a causal connection between his complaint about the paid lunch in January, 2009, and his termination six months later. Thus, the Court concluded that Shrable did not make out a prima facie case of retaliation under the FLSA.

Based on the above, the Court affirmed the district court's summary judgment for Eaton.

December 13, 2012

Employee Benefits-IRS Issues 2012 Cumulative List of Changes in Plan Qualification Requirements

The Internal Revenue Service has issued Notice 2012-76, which contains the 2012 Cumulative List of Changes in Plan Qualification Requirements (the "2012 Cumulative List"). This list is described in section 4 of Rev. Proc. 2007-44.

The 2012 Cumulative List is to be used by plan sponsors and practitioners, submitting determination letter applications for plans during the period beginning February 1, 2013 and ending January 31, 2014, to determine the provisions that the plans must contain. Plans using the 2012 Cumulative List will include single employer individually designed defined contribution plans and defined benefit plans that are in Cycle C. Generally, an individually designed plan is in Cycle C if the last digit of the employer identification number of the plan sponsor is 3 or 8. In addition, the 2012 Cumulative List will be used by sponsors of defined benefit pre-approved plans (that is, defined benefit plans that are master and prototype (M&P) or volume submitter (VS) plans) for the second submission under the remedial amendment cycle described in Rev. Proc. 2007-44.

December 12, 2012

Employment-Seventh Circuit Rules That A Plaintiff Terminated Following A Wrist Injury Does Not Have An ADA Claim

In Povey v. City of Jeffersonville, Indiana, No. 4:09-CV-00161 (7th Cir. 2012), the plaintiff, Angelina Povey ("Povey"), had injured her wrist while working as an attendant at the City of Jeffersonville ("Jeffersonville") animal shelter. Jeffersonville ultimately terminated Povey's employment. Povey then filed this suit, claiming that the termination discriminated and retaliated against her in violation of the Americans with Disabilities Act ("ADA"). The district court granted Jeffersonville's motion for summary judgment, and Povey appealed.

In October 2007, Povey had injured her wrist moving a dog from one cage to another at the animal shelter. She eventually had surgery on her wrist and underwent physical therapy to address the impairment through August 2008. After the surgery, Povey's workload was reduced, and her co-workers complained. At one point, Povey filed a complaint, alleging harassment from a co-worker.
In August 2008, Jeffersonville received medical notice-presumably from Povey's doctors- of Povey's permanent physical restrictions which prohibited repetitive hand movement and no lifting, pushing or pulling more than five pounds with her right arm. After receiving this notice, Povey was placed on leave with pay and subsequently fired by Jeffersonville. This suit ensued.

As to the claim of discrimination, here in the form of termination by Jeffersonville due to Povey's disability, the Seventh Circuit Court of Appeals (the "Court") said that the issue is whether Povey has a "disability" for ADA purposes. The ADA defines "disability" as: (1) a physical or mental impairment that substantially limits one or more of the major life activities of the individual; (2) a record of such an impairment; or (3) being regarded as having such an impairment. (see 42 U.S.C. § 12102(1)). Povey claims she falls in prong (3). The Court said that, to come within this prong when-as here-the major life activity limited by the disability is the ability to work , a plaintiff must show that the employer regards her as being significantly restricted in the ability to perform either a class or broad range of jobs. The Court said that Povey did not allege sufficient facts to shows that Jeffersonville had any such regard towards her. The Court concluded that Povey did not have a disability protected by the ADA, so that her claim of discrimination failed .

ŒŒ
As to the claim of retaliation, here in the form of termination by Jeffersonville due to the complaint of harrassment that Povey made, the Court noted that the ADA prohibits retaliation, even if the plaintiff's claim of discrimination in violation of the ADA has no merit. To prove retaliation, the plaintiff must offer evidence that: (1) she engaged in a statutorily protected activity-here the complaint she made about the harassment; (2) the defendant subjected her to an adverse employment action-here the termination by Jeffersonville; and (3) a causal connection existed between the two events. The Court concluded that Povey did not provide sufficient evidence to meet prong (3), so that her retaliation claim failed.

As such, the Court affirmed the district court's summary judgment in Jeffersonville's favor.

December 11, 2012

ERISA-Fourth Circuit Rules That Allegedly Mistaken Contributions To A Union Health Fund Need Not Be Returned

In U.S. Foodservice, Inc. v. Truck Drivers & Helpers Local Union No. 355 Health & Welfare Fund, No. 12-1108 (4th Cir. 2012), the employer, U.S. Foodservice, Inc. ("USF"), had-pursuant to a collective bargaining agreement (a "CBA")- been making contributions to the defendant Truck Drivers & Helpers Local Union No. 355 Health and Welfare Fund (the "Health Fund"). The Heath Fund is a welfare benefit plan subject to ERISA.

At one point, USF discovered that it had been contributing to the Health Fund more than it believed was required under the CBA. The problem: USF had made contributions to the Health Fund for hours paid at an overtime rate, even though it believed that the CBA only required contributions for hours paid at a straight-time rate. USF asked the Health Fund to return the excess contributions, but the Health Fund refused to do so, on the grounds that contributions were required for all hours, at all rates. This suit ensued under ERISA and the federal common law of unjust enrichment.

In analyzing the case, the Fourth Circuit Court of Appeals (the "Court") said that ERISA permits the return of an employer's plan contribution that was made as the result of "a mistake of fact or law," but only "after the plan administrator determines that the contribution was made by such a mistake." (ERISA section 403(c)(2)(A)(ii)). The district court had ruled that the employer was entitled to return of the contributions in question. However, in this case, the plan administrator determined that those contributions were not made by a mistake of fact or law, as it interpreted the CBA to require contributions for all hours paid, without regard to whether payment was made at straight or overtime rate . The Court found that this determination was not an abuse of discretion. Accordingly the Court reversed the district court's ruling and remanded the case back to the district court to conclude the case in accordance with the Court's decision.

December 10, 2012

Employee Benefits-IRS Provides Guidance On Notice Requirements For Benefit Restrictions On Single-Employer Defined Benefit Plans

In Employee Plans News (Issue 2012-3, Nov. 14, 2012), the Internal Revenue Service ("IRS") says that Notice 2012-46 (issued July 23, 2012) contains the following guidance:

• It explains when and how single-employer defined benefit plans must notify participants and beneficiaries of benefit restrictions (Internal Revenue Code Section 436 and ERISA Section 206(g))

• It contains a sample notice for plans to comply with ERISA Section 101(j)

Benefit Restrictions. The "benefit restrictions" are the following:

• Single-employer DB plans less than 60% funded must:

--restrict benefits, if any, for unpredictable contingent events (for example, a plant shutdown or similar event that isn't based on age, performance of services, receipt of compensation, death or disability), and

-- suspend benefit accruals.

• Plans less than 80% funded must restrict lump-sum distributions.

• Plans less than 80% funded, or where the sponsor is in bankruptcy, can't make prohibited payments. Prohibited payments include those:

-- that exceed the monthly single-life annuity payment, and

--made to insurers for irrevocable commitments to pay benefits.

Timing. The plan must restrict benefits on the first date that the plan's adjusted funding target attainment percentage (the "AFTAP") is actually or presumed to be less than the applicable 60% or 80%. A plan's AFTAP is its funded target attainment percentage plus any employee annuities purchased during the previous two plan years.
Plan administrators must notify participants and beneficiaries who are, or are likely to be, affected by the restrictions, in writing within 30 days after the date the restrictions take effect. Otherwise, the plan may be penalized up to $1,000 each
day it fails to provide the notice.

Effective Date. Although the notice requirements took effect on October 22, 2012, plan administrators could have relied on the notice or any reasonable interpretation of ERISA Section 101(j) before then.

December 7, 2012

Employment-Eighth Circuit Rules That Plaintiff Has Established A Case of Interference Under The FMLA

In Clinkscale v. St. Therese of New Hope, No. 12-1223 (8th Cir. 2012), the plaintiff, Ruby Clinkscale ("Clinkscale"), was appealing the district court's grant of summary judgment to her former employer, St. Therese of New Hope ("St. Therese"), stemming from the termination of her employment by St. Therese.

In analyzing this case, the Eighth Circuit Court of Appeals (the "Court") noted that Clinkscale-by producing a physician's diagnosis of incapacity for one full week, accompanied by two prescriptions for medication and an advised course of ongoing therapy- established that she has a serious health condition for purposes of the Family and Medical Leave Act (the "FMLA"). As such, the district court had only to determine whether Clinkscale could establish a prima facie case of interference with her FMLA rights.

The Court then said that, to state a claim for interference under the FMLA, Clinkscale must have given notice to St. Therese of her need for FMLA leave. After reviewing the record, the Court concluded that a reasonable jury could conclude that Clinkscale satisfied the FMLA's notice requirement by providing notice of her need for medical leave to St. Therese as soon as was practicable or, in the alternative, that Clinkscale had been terminated for taking such leave when a serious health condition unexpectedly prevented her from fulfilling her work assignment. Thus, Clinkscale could establish an interference claim. Accordingly, the Court reversed the district court's summary judgment, and remanded that case back to the district court.

December 6, 2012

Employee Benefits-Government Issues Proposed Rules On Wellness Program To Reflect The Affordable Care Act

The Departments of Health and Human Services ("HHS"), Labor and the Treasury have jointly released proposed rules on wellness programs to reflect changes made by the Affordable Care Act. These proposed rules would be effective for plan years starting on or after January 1, 2014. A fact sheet says the following about the proposed rules.

The proposed rules continue to support workplace wellness programs, including "participatory wellness programs" which generally are available without regard to an individual's health status. These programs include, for example, programs maintained by employers which: (1) reimburse employees for the cost of membership in a fitness center, (2) provide a reward to employees for attending a monthly, no-cost health education seminar, or (3) provide a reward to employees who complete a health risk assessment without requiring them to take further action.

The proposed rules also outline amended standards for workplace nondiscriminatory "health-contingent wellness programs," which generally require individuals to meet a specific standard related to their health to obtain a reward. Examples of health-contingent wellness programs are programs maintained by employers which: (a) provide a reward to those employees who do not use, or decrease their use of, tobacco, or (b) provide a reward to those employees who achieve a specified cholesterol level or weight as well as to those employees who fail to meet that biometric target but take certain additional required actions.

Protecting Employees. In order to protect employees from unfair practices, the proposed rules would require health-contingent wellness programs to meet certain requirements, including:

• Programs must be reasonably designed to promote health or prevent disease. To meet this rule, a program would have to offer a different, reasonable means of qualifying for the reward to any employee who does not meet the standard based on the measurement, test or screening that usually applies. Programs must have a reasonable chance of improving health or preventing disease and not be overly burdensome for employees.
• Programs must be reasonably designed to be available to all similarly situated employees. Reasonable alternative means of qualifying for the reward would have to be offered to employees whose medical conditions make it unreasonably difficult, or for whom it is medically inadvisable, to meet the specified health-related standard.
• Employees must be given notice of the opportunity to qualify for the same reward through other means. These proposed rules provide new sample language intended to be simpler for employees to understand and to increase the likelihood that those who qualify for a different means of obtaining a reward will contact the plan or issuer to request it.

Ensuring Flexibility for Employers. The proposed rules also implement changes in the Affordable Care Act that increase the maximum permissible reward under a health-contingent wellness program from 20 percent to 30 percent of the cost of health coverage, and that further increase the maximum reward to as much as 50 percent for programs designed to prevent or reduce tobacco use.

The proposed rules would not specify the types of wellness programs employers can offer, and invite comments on additional standards for wellness programs to protect consumers.

December 5, 2012

Employee Benefits-IRS Discusses Having A SEP Plan For Businesses Under Common Control

In Employee Plans News (Issue 2012-3, Nov. 14, 2012), the Internal Revenue Service ("IRS") provides guidance on maintaining a SEP Plan for employees of businesses under common control. The IRS posits the following situation: I own a sole proprietorship with several common-law employees. Recently I started a separate business as a C corporation. I own 100% of the corporation's stock and am currently the C corp's only employee. The C corp plans to adopt a Simpliied Employee Pension ("SEP") plan. Do I have to include the sole proprietorship employees in the SEP plan?

The IRS answers:Yes. Because the sole proprietorship and the C corp are under common control, any of the sole proprietorship's employees who meet the SEP plan's eligibility requirements must be included in the plan.

Commonly Controlled Businesses. For SEP plan purposes, you must treat employees of commonly controlled trades or businesses (whether or not incorporated) as employed by a single employer (Internal Revenue Code Section 414(c)). In this case, the sole proprietorship and the C corp are under common control as a brother-sister group of trades or businesses because you:

• own a controlling interest in both businesses, and

• are in effective control of each business (Treas. Reg. Section 1.414(c)-2(c)(1)).

In turn, you have a "controlling interest" in both businesses because you own the sole proprietorship and at least 80% of the C corp's total combined voting power of all classes of stock entitled to vote or at least 80% of the total value of shares of all of the C corp's classes of stock (Treas. Reg. Section 1.414(c)-2(b)(2)). You are in "effective control" of both businesses because you own the sole proprietorship and more than 50% of the C corp's total combined voting power of all classes of stock entitled to vote or more than 50% of the total value of shares of all of the C corp's classes of stock (Treas. Reg. Section 1.414(c)-2(c)(2)).

SEP Eligibility Rules. An employer must allow all employees who meet these requirements to participate in its SEP plan:

• are age 21 or older;

• worked for the employer in at least 3 of the last 5 years; and

• received at least $550 in compensation in 2012.

An employer can choose to use less restrictive eligibility requirements. For example, the plan may cover employees:

• who are age 18 or older instead of 21 or older, or

• immediately when hired instead of waiting until after they worked for the employer in at least 3 of the last 5 years.

Example: Your C corp's SEP plan's only requirement for participation is an employee must work 2 out of the last 5 years. One of the sole proprietorship's common-law employees has worked there since you started the business 3 years ago. Both you and this employee immediately meet the SEP's participation requirement. The other employees of your sole proprietorship and future employees of both the sole proprietorship and the C corp will be able to participate in the SEP plan once they meet the plan's eligibility requirements.

December 4, 2012

Employment-Sixth Circuit Rules That Nurse Who Failed To Use The Hospital's Time Reporting System Could Not Recover Wages For Missed Meal Breaks

In White v. Baptist Memorial Health Care Corp., No. 11-5717 (6th Cir. 2012), the plaintiff, Margaret White ("White"), was appealing the district court's grant of summary judgment to the defendant, Baptist Memorial Health Care Corp. ("Baptist"), on her claim under the Fair Labor Standards Act ("FLSA") that Baptist had failed to pay her wages for missed meal breaks.

In this case, White was a nurse for Baptist, a hospital, from August 2005 to August 2007 and treated patients that came to the emergency department. She did not have a regularly scheduled meal break due to the nature of her job at the hospital. Meal breaks occurred during her shift as work demands allowed. The employee handbook instructed employees to record all time spent performing work during meal breaks in an "exception log" whenever the meal break was partially or entirely interrupted. Though she did so initially, eventually White stopped reporting her missed meal breaks in the exception log, and Baptist did not pay her for the unreported missed breaks. This suit for the unpaid missed meal breaks ensued.

In analyzing the case, the Sixth Circuit Court of Appeals (the "Court") noted that time an employee spends working during a meal period is compensable under the FLSA. If an employer knows or has reason to believe that a worker is continuing to work, then the time is compensable working time (29 C.F.R. § 785.11). Therefore, the issue is whether Baptist knew or had reason to know it was not compensating White for working during her meal breaks. The burden is on White to establish the knowledge or constructive knowledge. Under the FLSA, if an employer establishes a reasonable process for an employee to report uncompensated work time, the employer is not liable for the non-payment if the employee fails to follow the established process. The Court said that, since White did not report the missed meal time in the exception log-as the employee handbook required-Baptist did not know, and should not have known, about the work during the missed meal periods. As such, the Court concluded that White's claim for the unpaid wages fails, and it affirmed the district court's summary judgment.

December 3, 2012

Employee Benefits-IRS Says That 401(k) Plan's Matching Formula May Require Additional Employer Contributions At Year's End

In Employee Plans News (Issue 2012-3, Nov. 14, 2012), the Internal Revenue Service ("IRS") provides guidance, which indicates that a 401(k) plan's matching contribution formula may require additional employer contributions at year's end.
The guidance posits the following question: Our 401(k) plan's match formula is 100% of a participant's salary deferrals up to 3% of the participant's entire year compensation with the matching contributions being made at the end of each payroll period. If a participant stops making salary deferrals mid-year, would we have to make additional matching contributions for that participant?

The IRS answers: Yes. If you haven't made the amount of matching contributions required by the plan's match formula when the participant stops making salary deferrals, you'll have to "true-up" the matching contributions for the participant.
Many plans require the employer to match salary deferrals up to a percentage of a participant's total compensation for the plan year (up to $250,000 for 2012). So, if a participant stops or decreases their salary deferrals during the year, you may
owe the participant an additional match.

An example: Steve elects to contribute 5% of his $48,000 annual compensation to his 401(k) plan. Steve's employer pays him $2,000 twice a month, deducts $100 (5% x $2,000) from his salary and contributes it to his 401(k) account. Steve's employer contributes a matching contribution of 100% of his salary deferral up to 3% of his wages every pay period, or $60 (3% x $2,000). The 401(k) plan document requires Steve's employer to use his entire plan-year compensation to determine the amount of the matching contribution. Steve stops making salary deferrals in May. At that point, the total match for the year is $480 ($60 times 8 payroll periods).

In this case, the 401(k) plan requires Steve's employer to make matching contributions of 100% of Steve's salary deferrals up to 3% of his annual compensation (3% x $48,000). Even though Steve's actual salary deferrals ($800) equaled only 1.6% of his annual compensation, his employer stopped matching when Steve stopped contributing in May. Steve's employer must make an additional $320 ($800 - $480) in matching contributions to equal 100% of Steve's salary deferrals up to 3% of his annual compensation required by the plan document.