IX. Matching contributions

Statement of Requirement: Code § 401(m); Reg. § 1.401(m)-1

Sample Plan Language:

If elected by the Employer in the adoption agreement, the Employer will make Matching Contributions to the Plan.

Sample Adoption Agreement Language:

The Employer will make Matching Contributions to the Plan on behalf of [ELECT ONE]:

[ ] a. All participants

[ ] b. All participants who are Non-highly Compensated Employees

(Note to reviewer: The following election is optional. If included, completion instructions should indicate that the Employer elect a. or b. and may also optionally elect c.)

[ ] c. All Long-Term Part-Time Employees as defined in section ____.

who make [ELECT ONE OR BOTH]:

[ ] 1. Elective Deferrals

[ ] 2. Employee Contributions

to the Plan.

The Employer shall contribute and allocate to each participant's Matching Contribution account an amount equal to:

[ ] i. [ ] [NOT MORE THAN 100] percent of the participant's Elective Deferrals.

[ ] ii. [ ] [NOT MORE THAN 100] percent of the participant's Employee Contributions.

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The Employer shall not match amounts provided above in excess of [$ ], or in excess of

[ %], of the participant's Compensation.

(Note to reviewer: Other discretionary match formulas are possible. Any formula used must preclude employer discretion over its allocation. See Reg. § 1.401-1(b)(1)(ii).)

(Note to reviewer: If a Standardized Plan includes a tiered matching formula, then the rate of Matching Contributions cannot increase as the rate of Elective Deferrals or Employee Contributions increases. Matching formulas, other than those above, such as flat-dollar formulas or formulas that target matches to lower paid Non-highly Compensated Employees, must satisfy additional requirements specified in Regulations § 1.401(m)- 2(a)(5).)

(Note to reviewer: Effective December 29, 2022, plans may permit participants to elect to receive matching and/or employer nonelective contributions as designated Roth contributions. See Section 604 of the SECURE 2.0 Act of 2022. If so elected, such contributions must be 100% fully and immediately vested when contributed into the plan.

The following sample adoption agreement election may be used to enable plan terms to administer this election. This election may also be used in conjunction with the formulas described at DC LRM #25, #25A, 29 and 94, all providing for allocation variants of a nonelective contribution. Elections with respect to matching contributions can be made separately from and independently of any election with respect to nonelective contributions. See Part L of Notice 2024-2 for administrative guidance in this regard. See also CODA LRM III for Roth Contribution sample plan language.)

Sample Adoption Agreement Language:

The Employer’s matching contribution will be:

[ ] a. Made as a pre-tax contribution.

[ ] b. Subject to participant election, made as a designated Roth contribution, in which case (i) the contribution amount and earnings thereon will be 100% fully and immediately vested, and (ii) it is includible in an individual’s gross income for the taxable year in which the contribution is allocated to the individual’s account.

If no election is made, Election a. applies.

Election b. can be made only if (i) the employee is fully vested in matching contributions at the time the contribution is allocated to the employee’s account, (ii) it is made by the employee no later than the time that the matching contribution is allocated to the employee’s account and (iii) it is irrevocable with respect to those contributions.

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An employee must have an effective opportunity to make or change the designation afforded by Elections a. and b. at least once during each plan year.