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us/statute/26/401/m — Nondiscrimination test for matching contributions and employee contributions · Axiom

(2)Requirements#

(A) Contribution percentage requirement A plan meets the contribution percentage requirement of this paragraph for any plan year only if the contribution percentage for eligible highly compensated employees for such plan year does not exceed the greater of— (i) 125 percent of such percentage for all other eligible employees for the preceding plan year, or (ii) the lesser of 200 percent of such percentage for all other eligible employees for the preceding plan year, or such percentage for all other eligible employees for the preceding plan year plus 2 percentage points. This subparagraph may be applied by using the plan year rather than the preceding plan year if the employer so elects, except that if such an election is made, it may not be changed except as provided by the Secretary.

(B) Multiple plans treated as a single plan If two or more plans of an employer to which matching contributions, employee contributions, or elective deferrals are made are treated as one plan for purposes of section 410(b), such plans shall be treated as one plan for purposes of this subsection. If a highly compensated employee participates in two or more plans of an employer to which contributions to which this subsection applies are made, all such contributions shall be aggregated for purposes of this subsection.

(2)(A)Contribution percentage requirement#

A plan meets the contribution percentage requirement of this paragraph for any plan year only if the contribution percentage for eligible highly compensated employees for such plan year does not exceed the greater of—

(i) 125 percent of such percentage for all other eligible employees for the preceding plan year, or

(ii) the lesser of 200 percent of such percentage for all other eligible employees for the preceding plan year, or such percentage for all other eligible employees for the preceding plan year plus 2 percentage points.

This subparagraph may be applied by using the plan year rather than the preceding plan year if the employer so elects, except that if such an election is made, it may not be changed except as provided by the Secretary.

(2)(A)(i)#

125 percent of such percentage for all other eligible employees for the preceding plan year, or

(2)(A)(ii)#

the lesser of 200 percent of such percentage for all other eligible employees for the preceding plan year, or such percentage for all other eligible employees for the preceding plan year plus 2 percentage points.

(2)(B)Multiple plans treated as a single plan#

If two or more plans of an employer to which matching contributions, employee contributions, or elective deferrals are made are treated as one plan for purposes of section 410(b), such plans shall be treated as one plan for purposes of this subsection. If a highly compensated employee participates in two or more plans of an employer to which contributions to which this subsection applies are made, all such contributions shall be aggregated for purposes of this subsection.

(4)Definitions#

For purposes of this subsection—

(A) Matching contribution The term “matching contribution” means— (i) any employer contribution made to a defined contribution plan on behalf of an employee on account of an employee contribution made by such employee, (ii) any employer contribution made to a defined contribution plan on behalf of an employee on account of an employee’s elective deferral, and (iii) subject to the requirements of paragraph (14), any employer contribution made to a defined contribution plan on behalf of an employee on account of a qualified student loan payment.

(B) Elective deferral The term “elective deferral” means any employer contribution described in section 402(g)(3).

(C) Qualified nonelective contributions The term “qualified nonelective contribution” means any employer contribution (other than a matching contribution) with respect to which— (i) the employee may not elect to have the contribution paid to the employee in cash instead of being contributed to the plan, and (ii) the requirements of subparagraphs (B) and (C) of subsection (k)(2) are met.

(D) Qualified student loan payment The term “qualified student loan payment” means a payment made by an employee in repayment of a qualified education loan (as defined in section 221(d)(1)) incurred by the employee to pay qualified higher education expenses, but only— (i) to the extent such payments in the aggregate for the year do not exceed an amount equal to— (I) the limitation applicable under section 402(g) for the year (or, if lesser, the employee’s compensation (as defined in section 415(c)(3)) for the year), reduced by (II) the elective deferrals made by the employee for such year, and (ii) if the employee certifies annually to the employer making the matching contribution under this paragraph that such payment has been made on such loan. For purposes of this subparagraph, the term “qualified higher education expenses” means the cost of attendance (as defined in section 472 of the Higher Education Act of 1965, as in effect on the day before the date of the enactment of the Taxpayer Relief Act of 1997) at an eligible educational institution (as defined in section 221(d)(2)).

(4)(A)Matching contribution#

The term “matching contribution” means—

(i) any employer contribution made to a defined contribution plan on behalf of an employee on account of an employee contribution made by such employee,

(ii) any employer contribution made to a defined contribution plan on behalf of an employee on account of an employee’s elective deferral, and

(iii) subject to the requirements of paragraph (14), any employer contribution made to a defined contribution plan on behalf of an employee on account of a qualified student loan payment.

(4)(A)(i)#

any employer contribution made to a defined contribution plan on behalf of an employee on account of an employee contribution made by such employee,

(4)(A)(ii)#

any employer contribution made to a defined contribution plan on behalf of an employee on account of an employee’s elective deferral, and

(4)(A)(iii)#

subject to the requirements of paragraph (14), any employer contribution made to a defined contribution plan on behalf of an employee on account of a qualified student loan payment.

(4)(B)Elective deferral#

The term “elective deferral” means any employer contribution described in section 402(g)(3).

(4)(C)Qualified nonelective contributions#

The term “qualified nonelective contribution” means any employer contribution (other than a matching contribution) with respect to which—

(i) the employee may not elect to have the contribution paid to the employee in cash instead of being contributed to the plan, and

(ii) the requirements of subparagraphs (B) and (C) of subsection (k)(2) are met.

(4)(C)(i)#

the employee may not elect to have the contribution paid to the employee in cash instead of being contributed to the plan, and

(4)(C)(ii)#

the requirements of subparagraphs (B) and (C) of subsection (k)(2) are met.

(4)(D)Qualified student loan payment#

The term “qualified student loan payment” means a payment made by an employee in repayment of a qualified education loan (as defined in section 221(d)(1)) incurred by the employee to pay qualified higher education expenses, but only—

(i) to the extent such payments in the aggregate for the year do not exceed an amount equal to— (I) the limitation applicable under section 402(g) for the year (or, if lesser, the employee’s compensation (as defined in section 415(c)(3)) for the year), reduced by (II) the elective deferrals made by the employee for such year, and

(ii) if the employee certifies annually to the employer making the matching contribution under this paragraph that such payment has been made on such loan.

For purposes of this subparagraph, the term “qualified higher education expenses” means the cost of attendance (as defined in section 472 of the Higher Education Act of 1965, as in effect on the day before the date of the enactment of the Taxpayer Relief Act of 1997) at an eligible educational institution (as defined in section 221(d)(2)).

(4)(D)(i)#

to the extent such payments in the aggregate for the year do not exceed an amount equal to—

(I) the limitation applicable under section 402(g) for the year (or, if lesser, the employee’s compensation (as defined in section 415(c)(3)) for the year), reduced by

(II) the elective deferrals made by the employee for such year, and

(4)(D)(i)(I)#

the limitation applicable under section 402(g) for the year (or, if lesser, the employee’s compensation (as defined in section 415(c)(3)) for the year), reduced by

(4)(D)(i)(II)#

the elective deferrals made by the employee for such year, and

(4)(D)(ii)#

if the employee certifies annually to the employer making the matching contribution under this paragraph that such payment has been made on such loan.

(5)Employees taken into consideration#

(A) In general Any employee who is eligible to make an employee contribution (or, if the employer takes elective contributions into account, elective contributions) or to receive a matching contribution under the plan being tested under paragraph (1) shall be considered an eligible employee for purposes of this subsection.

(B) Certain nonparticipants If an employee contribution is required as a condition of participation in the plan, any employee who would be a participant in the plan if such employee made such a contribution shall be treated as an eligible employee on behalf of whom no employer contributions are made.

(C) Special rule for early participation If an employer elects to apply section 410(b)(4)(B) in determining whether a plan meets the requirements of section 410(b), the employer may, in determining whether the plan meets the requirements of paragraph (2), exclude from consideration all eligible employees (other than highly compensated employees) who have not met the minimum age and service requirements of section 410(a)(1)(A).

(5)(A)In general#

Any employee who is eligible to make an employee contribution (or, if the employer takes elective contributions into account, elective contributions) or to receive a matching contribution under the plan being tested under paragraph (1) shall be considered an eligible employee for purposes of this subsection.

(5)(B)Certain nonparticipants#

If an employee contribution is required as a condition of participation in the plan, any employee who would be a participant in the plan if such employee made such a contribution shall be treated as an eligible employee on behalf of whom no employer contributions are made.

(5)(C)Special rule for early participation#

If an employer elects to apply section 410(b)(4)(B) in determining whether a plan meets the requirements of section 410(b), the employer may, in determining whether the plan meets the requirements of paragraph (2), exclude from consideration all eligible employees (other than highly compensated employees) who have not met the minimum age and service requirements of section 410(a)(1)(A).

(6)Plan not disqualified if excess aggregate contributions distributed before end of following plan year#

(A) In general A plan shall not be treated as failing to meet the requirements of paragraph (1) for any plan year if, before the close of the following plan year, the amount of the excess aggregate contributions for such plan year (and any income allocable to such contributions through the end of such year) is distributed (or, if forfeitable, is forfeited). Such contributions (and such income) may be distributed without regard to any other provision of law.

(B) Excess aggregate contributions For purposes of subparagraph (A), the term “excess aggregate contributions” means, with respect to any plan year, the excess of— (i) the aggregate amount of the matching contributions and employee contributions (and any qualified nonelective contribution or elective contribution taken into account in computing the contribution percentage) actually made on behalf of highly compensated employees for such plan year, over (ii) the maximum amount of such contributions permitted under the limitations of paragraph (2)(A) (determined by reducing contributions made on behalf of highly compensated employees in order of their contribution percentages beginning with the highest of such percentages).

(C) Method of distributing excess aggregate contributions Any distribution of the excess aggregate contributions for any plan year shall be made to highly compensated employees on the basis of the amount of contributions on behalf of, or by, each such employee. Forfeitures of excess aggregate contributions may not be allocated to participants whose contributions are reduced under this paragraph.

(D) Coordination with subsection (k) and 402(g) The determination of the amount of excess aggregate contributions with respect to a plan shall be made after— (i) first determining the excess deferrals (within the meaning of section 402(g)), and (ii) then determining the excess contributions under subsection (k).

(6)(A)In general#

A plan shall not be treated as failing to meet the requirements of paragraph (1) for any plan year if, before the close of the following plan year, the amount of the excess aggregate contributions for such plan year (and any income allocable to such contributions through the end of such year) is distributed (or, if forfeitable, is forfeited). Such contributions (and such income) may be distributed without regard to any other provision of law.

(6)(B)Excess aggregate contributions#

For purposes of subparagraph (A), the term “excess aggregate contributions” means, with respect to any plan year, the excess of—

(i) the aggregate amount of the matching contributions and employee contributions (and any qualified nonelective contribution or elective contribution taken into account in computing the contribution percentage) actually made on behalf of highly compensated employees for such plan year, over

(ii) the maximum amount of such contributions permitted under the limitations of paragraph (2)(A) (determined by reducing contributions made on behalf of highly compensated employees in order of their contribution percentages beginning with the highest of such percentages).

(6)(B)(i)#

the aggregate amount of the matching contributions and employee contributions (and any qualified nonelective contribution or elective contribution taken into account in computing the contribution percentage) actually made on behalf of highly compensated employees for such plan year, over

(6)(B)(ii)#

the maximum amount of such contributions permitted under the limitations of paragraph (2)(A) (determined by reducing contributions made on behalf of highly compensated employees in order of their contribution percentages beginning with the highest of such percentages).

(6)(C)Method of distributing excess aggregate contributions#

Any distribution of the excess aggregate contributions for any plan year shall be made to highly compensated employees on the basis of the amount of contributions on behalf of, or by, each such employee. Forfeitures of excess aggregate contributions may not be allocated to participants whose contributions are reduced under this paragraph.

(6)(D)Coordination with subsection (k) and 402(g)#

The determination of the amount of excess aggregate contributions with respect to a plan shall be made after—

(i) first determining the excess deferrals (within the meaning of section 402(g)), and

(ii) then determining the excess contributions under subsection (k).

(6)(D)(i)#

first determining the excess deferrals (within the meaning of section 402(g)), and

(6)(D)(ii)#

then determining the excess contributions under subsection (k).

(11)Additional alternative method of satisfying tests#

(A) In general A defined contribution plan shall be treated as meeting the requirements of paragraph (2) with respect to matching contributions if the plan— (i) meets the contribution requirements of subparagraph (B) or (C) of subsection (k)(12), (ii) meets the notice requirements of subsection (k)(12)(D), and (iii) meets the requirements of subparagraph (B).

(B) Limitation on matching contributions The requirements of this subparagraph are met if— (i) matching contributions on behalf of any employee may not be made with respect to an employee’s contributions or elective deferrals in excess of 6 percent of the employee’s compensation, (ii) the rate of an employer’s matching contribution does not increase as the rate of an employee’s contributions or elective deferrals increase, and (iii) the matching contribution with respect to any highly compensated employee at any rate of an employee contribution or rate of elective deferral is not greater than that with respect to an employee who is not a highly compensated employee.

(11)(A)In general#

A defined contribution plan shall be treated as meeting the requirements of paragraph (2) with respect to matching contributions if the plan—

(i) meets the contribution requirements of subparagraph (B) or (C) of subsection (k)(12),

(ii) meets the notice requirements of subsection (k)(12)(D), and

(iii) meets the requirements of subparagraph (B).

(11)(A)(i)#

meets the contribution requirements of subparagraph (B) or (C) of subsection (k)(12),

(11)(A)(ii)#

meets the notice requirements of subsection (k)(12)(D), and

(11)(A)(iii)#

meets the requirements of subparagraph (B).

(11)(B)Limitation on matching contributions#

The requirements of this subparagraph are met if—

(i) matching contributions on behalf of any employee may not be made with respect to an employee’s contributions or elective deferrals in excess of 6 percent of the employee’s compensation,

(ii) the rate of an employer’s matching contribution does not increase as the rate of an employee’s contributions or elective deferrals increase, and

(iii) the matching contribution with respect to any highly compensated employee at any rate of an employee contribution or rate of elective deferral is not greater than that with respect to an employee who is not a highly compensated employee.

(11)(B)(i)#

matching contributions on behalf of any employee may not be made with respect to an employee’s contributions or elective deferrals in excess of 6 percent of the employee’s compensation,

(11)(B)(ii)#

the rate of an employer’s matching contribution does not increase as the rate of an employee’s contributions or elective deferrals increase, and

(11)(B)(iii)#

the matching contribution with respect to any highly compensated employee at any rate of an employee contribution or rate of elective deferral is not greater than that with respect to an employee who is not a highly compensated employee.

(13)Matching contributions for qualified student loan payments#

(A) In general For purposes of paragraph (4)(A)(iii), an employer contribution made to a defined contribution plan on account of a qualified student loan payment shall be treated as a matching contribution for purposes of this title if— (i) the plan provides matching contributions on account of elective deferrals at the same rate as contributions on account of qualified student loan payments, (ii) the plan provides matching contributions on account of qualified student loan payments only on behalf of employees otherwise eligible to receive matching contributions on account of elective deferrals, (iii) under the plan, all employees eligible to receive matching contributions on account of elective deferrals are eligible to receive matching contributions on account of qualified student loan payments, and (iv) the plan provides that matching contributions on account of qualified student loan payments vest in the same manner as matching contributions on account of elective deferrals.

(B) Treatment for purposes of nondiscrimination rules, etc. (i) Nondiscrimination rules For purposes of subparagraph (A)(iii), subsection (a)(4), and section 410(b), matching contributions described in paragraph (4)(A)(iii) shall not fail to be treated as available to an employee solely because such employee does not have debt incurred under a qualified education loan (as defined in section 221(d)(1)). (ii) Student loan payments not treated as plan contribution.— Except as provided in clause (iii), a qualified student loan payment shall not be treated as a contribution to a plan under this title. (iii) Matching contribution rules Solely for purposes of meeting the requirements of paragraph (11)(B), (12), or (13) of this subsection, or paragraph (11)(B)(i)(II), (12)(B), (13)(D), or (16)(D) of subsection (k), a plan may treat a qualified student loan payment as an elective deferral or an elective contribution, whichever is applicable. (iv) Actual deferral percentage testing In determining whether a plan meets the requirements of subsection (k)(3)(A)(ii) for a plan year, the plan may apply the requirements of such subsection separately with respect to all employees who receive matching contributions described in paragraph (4)(A)(iii) for the plan year.

(C) Employer may rely on employee certification The employer may rely on an employee certification of payment under paragraph (4)(D)(ii).

(13)(A)In general#

For purposes of paragraph (4)(A)(iii), an employer contribution made to a defined contribution plan on account of a qualified student loan payment shall be treated as a matching contribution for purposes of this title if—

(i) the plan provides matching contributions on account of elective deferrals at the same rate as contributions on account of qualified student loan payments,

(ii) the plan provides matching contributions on account of qualified student loan payments only on behalf of employees otherwise eligible to receive matching contributions on account of elective deferrals,

(iii) under the plan, all employees eligible to receive matching contributions on account of elective deferrals are eligible to receive matching contributions on account of qualified student loan payments, and

(iv) the plan provides that matching contributions on account of qualified student loan payments vest in the same manner as matching contributions on account of elective deferrals.

(13)(A)(i)#

the plan provides matching contributions on account of elective deferrals at the same rate as contributions on account of qualified student loan payments,

(13)(A)(ii)#

the plan provides matching contributions on account of qualified student loan payments only on behalf of employees otherwise eligible to receive matching contributions on account of elective deferrals,

(13)(A)(iii)#

under the plan, all employees eligible to receive matching contributions on account of elective deferrals are eligible to receive matching contributions on account of qualified student loan payments, and

(13)(A)(iv)#

the plan provides that matching contributions on account of qualified student loan payments vest in the same manner as matching contributions on account of elective deferrals.

(13)(B)Treatment for purposes of nondiscrimination rules, etc.#

(i) Nondiscrimination rules For purposes of subparagraph (A)(iii), subsection (a)(4), and section 410(b), matching contributions described in paragraph (4)(A)(iii) shall not fail to be treated as available to an employee solely because such employee does not have debt incurred under a qualified education loan (as defined in section 221(d)(1)).

(ii) Student loan payments not treated as plan contribution.— Except as provided in clause (iii), a qualified student loan payment shall not be treated as a contribution to a plan under this title.

(iii) Matching contribution rules Solely for purposes of meeting the requirements of paragraph (11)(B), (12), or (13) of this subsection, or paragraph (11)(B)(i)(II), (12)(B), (13)(D), or (16)(D) of subsection (k), a plan may treat a qualified student loan payment as an elective deferral or an elective contribution, whichever is applicable.

(iv) Actual deferral percentage testing In determining whether a plan meets the requirements of subsection (k)(3)(A)(ii) for a plan year, the plan may apply the requirements of such subsection separately with respect to all employees who receive matching contributions described in paragraph (4)(A)(iii) for the plan year.

(13)(B)(i)Nondiscrimination rules#

For purposes of subparagraph (A)(iii), subsection (a)(4), and section 410(b), matching contributions described in paragraph (4)(A)(iii) shall not fail to be treated as available to an employee solely because such employee does not have debt incurred under a qualified education loan (as defined in section 221(d)(1)).

(13)(B)(ii)Student loan payments not treated as plan contribution.—#

Except as provided in clause (iii), a qualified student loan payment shall not be treated as a contribution to a plan under this title.

(13)(B)(iii)Matching contribution rules#

Solely for purposes of meeting the requirements of paragraph (11)(B), (12), or (13) of this subsection, or paragraph (11)(B)(i)(II), (12)(B), (13)(D), or (16)(D) of subsection (k), a plan may treat a qualified student loan payment as an elective deferral or an elective contribution, whichever is applicable.

(13)(B)(iv)Actual deferral percentage testing#

In determining whether a plan meets the requirements of subsection (k)(3)(A)(ii) for a plan year, the plan may apply the requirements of such subsection separately with respect to all employees who receive matching contributions described in paragraph (4)(A)(iii) for the plan year.

(13)(C)Employer may rely on employee certification#

The employer may rely on an employee certification of payment under paragraph (4)(D)(ii).

(1)In general#