III. Elective deferral elections

Statement of Requirement: Code §§ 401(k), 402A and 414(v); Reg. §§ 1.401(k)-1(e) and (f)

(Note to reviewer: The Plan must provide a means by which an employee who is eligible to participate in the CODA may elect to have the Employer make payments either (1) as contributions to a trust under the Plan on behalf of the employee in accordance with a cash or deferred election, or (2) to the employee directly in cash. Such an employee, if age 50 or over by the end of his or her taxable year, must also be permitted to make Catch-up Contributions as defined in Code § 414(v).

In addition, if the Plan provides for Roth Elective Deferrals, participants must be able to so designate some or all of their Elective Deferrals with each designated type maintained in a separate account.)

(Note to reviewer: For years beginning after December 31, 2023, Section 603 of the SECURE 2.0 Act requires that eligible participants whose Code § 3121(a) wages for the preceding calendar year from the employer sponsoring the plan exceed $145,000 may only make Catch-Up Contributions if these additional elective deferrals are designated Roth contributions. However, Notice 2023-62, 2023-37 I.R.B. 817, provides for a two-year

3 | Cash or Deferred Arrangement (CODA) LRM Package 01-2024

administrative transition period, until 2026, for implementing the requirement that any Catch-Up Contributions made by these participants must be designated as Roth Elective Deferrals. Because future guidance is expected, this statutory change was not included on the Cumulative List and therefore sample plan language is not provided in this regard.

After 2024, the $145,0000 amount is adjusted by the Secretary of the Treasury, in multiples of $5,000, for cost-of-living increases. It is expected that this CODA LRM III will be revised in the future accordingly.)

(Note to reviewer: For plan years beginning after December 31, 2023, a defined contribution plan may include pension-linked emergency savings accounts (PLESAs) funded by matched or unmatched elective deferrals, as described in Code § 402A(e). As noted in the introductory page to these LRMs, sample plan language for this provision is not included as this statutory change was not included on the Cumulative List. For guidance, see Notice 2024-22.)

(Note to reviewer: The Plan must specify a reasonable period, at least once each Plan Year, during which a participant may elect to commence Elective Deferrals. Such election may not be made retroactively. A participant's election to commence Elective Deferrals must remain in effect until modified or terminated.)

The Plan must also specify a reasonable period at least once each Plan Year during which a participant may elect to terminate an election or to modify the amount, type (Roth, or pre- tax) or frequency of his or her Elective Deferrals.

A plan that provides for automatic enrollment, whereby a stated amount is automatically withheld from a participant's salary and contributed to the plan as an Elective Deferral (either Roth, pre-tax or some combination of those, as specified in the plan) unless he or she affirmatively elects a different amount (including no amount) or type of Elective Deferral, must provide the participant with an effective opportunity to elect a different amount (including no amount) and type. See also CODA LRM XX, Qualified Automatic Contribution Arrangements (QACAs) and CODA LRM XXI, Eligible Automatic Contribution Arrangement (EACA). See also Part A of Notice 2024-2.)

Sample Plan Language:

An employee eligible to make Elective Deferrals under the Plan may submit a deferral election to the Plan administrator at any time, specifying the amount (in dollars or percentages) and type (either Roth, Pre-tax or a specific combination) of Elective Deferrals to be withheld from each wage payment. Such election will be effective for the first pay period beginning after 5 business days from receipt of the election, unless a later pay period is specified by the employee. An employee's election will remain in effect until superseded by another election. Except in the case of an in-plan Roth rollover (a rollover to a participant’s Roth Elective deferral account from

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another account of the participant in this plan), Elective Deferrals contributed to the Plan as one type, either Roth or Pre-tax, may not later be reclassified as the other type.

A participant's Roth Elective Deferrals will be deposited in the participant's Roth Elective Deferral account in the Plan. No contributions other than Roth Elective Deferrals, in-plan Roth rollovers and properly attributable earnings will be credited to each participant's Roth Elective Deferral account, and gains, losses and other credits or charges will be allocated on a reasonable and consistent basis to such account.

The Plan will maintain a record of the amount of Roth Elective Deferrals in each participant's Roth Elective Deferral account. Pre-tax and Roth Elective Deferrals will be separately accounted for, and adjusted for gains and losses separately.

(Note to reviewer: The following applies to apply to contributions made after December 29, 2022. See CODA LRM IX.)

The Plan will separately account for amounts made as designated Roth matching contributions or designated Roth nonelective contributions, and these amounts will be adjusted for gains and losses separately.

(Note to reviewer: See CODA LRM V for the definition of Elective Deferrals.)