Form 9416 - Employee Plan Deficiency Checksheet Attachment #11 - Section 401(M) Requirements Page 3
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1122 (cont.)
were made. Section
of the plan should be amended accordingly. IRC sections 401(m)(6)(A) and 4979
IV.c.(v)
and Regs. section 1.401(m)-2(b)(4).
Section
of the plan should be amended to provide that the distribution (or forfeiture, if
1123, 1124
applicable) of excess aggregate contributions shall be made on the basis of the respective amounts
attributable to each highly compensated employee. The highly compensated employees subject to actual distribution
IV.(vi)
or forfeiture are determined using the “dollar levelling method” starting with the highly compensated employee with the
greatest dollar amount of employee, matching and other contributions treated as matching contributions for the plan
year and continuing until the amount of the excess aggregate contributions has been accounted for. IRC section
401(m)(6)(C) and Regs. section 1.401(m)-2(b)(2)(iii).
1125
Section
of the plan should be amended to provide for correction of excess aggregate
contributions. IRC section 401(m)(6) and Regs. section 1.401(m)-2(b).
IV.d.
1141, 1142
Section
of the plan should be amended to define highly compensated employee as an
employee who:
V.a.
1. was a 5 percent owner, as defined in section 416(i)(1)(A)(ii), at any time during the determination year or the
look-back year; or
2. had compensation from the employer for the look-back year in excess of $80,000 (as adjusted), and, if the employer
so elects in the plan, was in the top-paid group for the look-back year.
IRC section 414(q), Regs. section 1.414(q)-1T and Notice 97-45, 1997-2 C.B. 296.
1143, 1144,
For purposes of the definition of highly compensated employee, section
of the plan should be
1145
amended to provide that:
1. The determination year is the plan year for which the determination of who is highly compensated is being made.
V.b.
2. The look-back year is the 12-month period immediately preceding the determination year, or if the employer so
elects in the plan, the calendar year beginning with or within such 12-month period.
3. Compensation is compensation within the meaning of section 415(c)(3).
4. Employers aggregated under sections 414(b), (c), (m) or (o) are treated as a single employer.
5. If the employer has made a top-paid group election, the top-paid group consists of the top 20% of employees
ranked on the basis of compensation received during the look-back year. For purposes of determining the number of
employees in the top-paid group, employees described in section 414(q)(5) and Q&A 9(b) of section 1.414(q)-1T of the
regulations are excluded.
IRC section 414(q), Regs. section 1.414(q)-1T and Notice 97-45, 1997-2 C.B. 296.
1134
Section
of the plan should be amended to define compensation, for purposes of the actual
contribution percentage (ACP) test of section 401(m) and the determination of excess aggregate
contributions, in a manner that satisfies section 414(s) and over a period specified in section 1.401(m)-5 of the
V.c.
regulations. A definition will satisfy section 414(s) if it conforms to one of the definitions described in sections 1.414(s)-
1(c)(2) and 1.414(s)-1(c)(3) of the regulations. Alternatively, submit a demonstration that the definition is
nondiscriminatory. IRC sections 401(m)(3)(B) and 414(s) and Regs. sections 1.401(m)-5 and 1.414(s)-1.
VI.
Reserved.
1152
Section
of the plan should be amended to provide the matching formula or nonelective
contribution formula it is using to automatically satisfy section 401(k).
VII.a.
1153
Section
of the plan should be amended to specify the applicable vesting schedule for matching
contributions, if not immediately nonforfeitable.
VII.b.(i)
1154, 1155
Section
of the plan should be amended to specify that (1) matching contributions may not be
made with respect to employee contributions or elective contributions that in the aggregate exceed 6% of the
employee’s compensation, (2) the rate of matching contributions may not increase as the rate of employee contribu-
VII.b.(ii)
tions or elective contributions increases, (3) at any rate of employee contributions or elective contributions the rate of
9416
Cat. No. 14162J
Form
(Rev. 11-2006)
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