Form 9416 - Employee Plan Deficiency Checksheet Attachment #11 - Section 401(M) Requirements

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Date
Department of the Treasury — Internal Revenue Service
9416
Form
Employee Plan Deficiency Checksheet
(Rev. November 2006)
Attachment #11 — Section 401(m) Requirements
For IRS Use
Please furnish the amendment(s) requested in the section(s) checked below.
1101, 1102,
Section
of the plan should be amended to provide that the plan will meet the nondiscrimination
1103
test set forth in section 401(m)(2)(A) of the Code that applies to employee and matching contributions. Under
this test, the actual contribution percentage (ACP) for the group of eligible highly compensated employees for the
II.a.(i), (ii)
current plan year may not exceed the greater of (a) 125% of the ACP for all other eligible employees for the prior plan
year or (b) the lesser of twice the ACP for all other eligible employees for the prior plan year, or such ACP for all other
eligible employees for the prior plan year plus 2%. If the plan is using the current year testing method, then “the
current plan year” should be substituted for “the prior plan year” in the previous sentence. The ACP for a group of
eligible employees is the average of the ratios (calculated separately for each employee) of the sum of matching and
employee contributions and other contributions taken into account paid under the plan on behalf of each employee for
the relevant plan year, divided by the employee’s compensation for that plan year. Employee contributions are any
employee contributions made on behalf of an employee to an individual account to which attributable earnings and
losses are allocated. Matching contributions are any employer contributions (including discretionary contributions)
made to a plan on account of an employee contribution or elective contribution to a plan maintained by the employer
and any forfeitures allocated on the basis of employee contributions, matching contributions, or elective contributions.
For purposes of this requirement, the plan may incorporate by reference the provisions of section 401(m) of the Code
and section 1.401(m)-2 of the regulations. IRC section 401(m) and Regs. section 1.401(m)-1(c)(2) and -2(a)(1)(i).
1163, 1164,
Section
of the plan should be amended to provide that the plan will take into account the actual
1165
contribution ratios of all eligible employees for purposes of the actual contribution percentage (ACP) test in
IRC section 401(m). For this purpose, an eligible employee is any employee who is directly or indirectly eligible to
Il.b.(i)
receive an allocation of matching contributions or to make employee contributions and includes: an employee who
would be a plan participant but for the failure to make required contributions; an employee whose right to make
employee contributions or receive matching contributions has been suspended because of an election (other than
certain one-time elections) not to participate; and an employee who cannot make an employee contribution or receive a
matching contribution because section 415(c)(1) prevents the employee from receiving additional annual additions. In
the case of an eligible employee who makes no employee contributions and who receives no matching contributions,
the contribution ratio that is to be included in determining the ACP is zero. IRC section 401(m)(3) and (5) and Regs.
section 1.401(m)-5. If an election has been made to apply section 410(b)(4)(B), the plan may provide that eligible
non-highly compensated employees who have not met minimum age and service requirements under section
410(a)(1)(A) are excluded from the ACP test. IRC section 401(m)(5)(C).
Section
of the plan should be amended to provide that, in calculating the actual contribution
1106, 1107
percentage (ACP) test of IRC section 401(m) for a plan year, contributions will be taken into account as
follows: An employee contribution is to be taken into account if it is paid to the trust during the plan year or paid to an
II.b.(ii)
agent of the plan and transmitted to the trust within a reasonable period after the end of the plan year. An excess
contribution to a cash or deferred arrangement that is recharacterized is to be taken into account in the plan year in
which the contribution would have been received in cash by the employee had the employee not elected to defer the
amounts. A matching contribution taken into account for a plan year only if it is (1) made on account of the employee’s
elective or employee contributions for the plan year, (2) allocated to the employee’s account as of a date within that
year, and (3) paid to the trust no later than the 12 months immediately following that year. Qualified matching
contributions which are used to meet the requirements of section 401(k)(3)(A) are not to be taken into account for
purposes of the ACP test of section 401(m). IRC section 401(m)(3) and Regs. section 1.401(m)-2(a)(4) and (5).
Section
of the plan should be amended to provide that for purposes of determining whether a
1108
plan satisfies the actual contribution percentage test of IRC section 401(m), all employee and matching
contributions that are made under two or more plans that are aggregated for purposes of section 401(a)(4) and 410(b)
II.b.(iii)
(other than section 410(b)(2)(A)(ii)) are to be treated as made under a single plan, and that if two or more plans are
permissively aggregated for purposes of section 401(m), the aggregated plans must also satisfy sections 401(a)(4) and
410(b) as though they were a single plan. IRC section 401(m)(2)(B) and Regs. section 1.401(m)-1(b)(4).
Section
of the plan should be amended to provide that in calculating the actual contribution
1109
percentage for purposes of section 401(m), the actual contribution ratio of a highly compensated employee
will be determined by treating all plans subject to section 401(m) under which the highly compensated employee is
II.b.(iv)
eligible (other then those that may not be permissively aggregated) as a single plan. IRC section 401(m)(2)(B) and
Regs. section 1.401(m)-2(a)(3)(ii).
9416
Cat. No. 14162J
Form
(Rev. 11-2006)

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