XII. Distribution of excess contributions

Statement of Requirement: Code §§ 401(k)(8), 402A(d)(3) and 4979; Reg. § 1.401(k)-2(b)

(Note to reviewer: Excess Contributions for a Plan Year, plus any income and minus any loss allocable thereto, must be distributed no later than 12 months after such Plan Year. If both Pre-tax Elective Deferrals and Roth Elective Deferrals were made for the year, the Plan may provide that distribution of Excess Contributions will consist of a participant's Pre-tax Elective Deferrals, Roth Elective Deferrals or a combination of both, to the extent such type of Elective Deferrals was made for the year. If such excess amounts are distributed more than 2½ months (6 months in the case of certain plans with an eligible automatic contribution arrangement) after the last day of the Plan Year in which such excess amounts arose, then Code § 4979 imposes a 10-percent excise tax on the Employer with respect to such amounts.)

Sample Plan Language:

Notwithstanding any other provision of the Plan, Excess Contributions, plus any income and minus any loss allocable thereto, shall be distributed no later than 12 months after a Plan Year to participants to whose accounts such Excess Contributions were allocated for such Plan Year, except to the extent such Excess Contributions are classified as Catch-up Contributions. Excess Contributions are allocated to the Highly Compensated Employees with the largest amounts of employer contributions taken into account in calculating the ADP test for the year in which the excess arose, beginning with the Highly Compensated Employee with the largest amount of such employer contributions and continuing in descending order until all the Excess Contributions have been allocated. To the extent a Highly Compensated Employee has not reached his or her Catch-up Contribution limit under the Plan, Excess Contributions allocated to such Highly Compensated Employee are Catch-up Contributions and will not be treated as Excess Contributions. If such excess amounts (other than Catch-up Contributions) are distributed more than 2½ months after the last day of the Plan Year in which such excess amounts arose, a 10percent excise tax will be imposed on the employer maintaining the Plan with respect to such amounts.

Excess Contributions shall be treated as annual additions under the Plan even if distributed.

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

Determination of Income or Loss: Excess Contributions shall be adjusted for any income or loss. The income or loss allocable to Excess Contributions allocated to each participant is the income or loss allocable to the participant's Elective Deferral account (and, if applicable, the Qualified Nonelective Contribution account or the Qualified Matching Contribution account or both) for the Plan Year multiplied by a fraction, the numerator of which is such participant's Excess Contributions for the year and the denominator is the participant's account balance attributable to Elective Deferrals (and Qualified Nonelective Contributions or Qualified Matching Contributions, or both, if any of such contributions are included in the ADP test) without regard to any income or loss occurring during such Plan Year.

(Note to reviewer: A Plan may use any reasonable method for computing the income or loss allocable to Excess Contributions, provided such method is used consistently for all participants and for all corrective distributions under the Plan for the Plan Year, and is used by the Plan for allocating income or loss to participants' accounts. Gap-period income or loss must be excluded from any distribution of Excess,Contributions.)

Accounting for Excess Contributions: Excess Contributions allocated to a participant shall be distributed from the participant's Elective Deferral account and Qualified Matching Contribution account (if applicable) in proportion to the participant's Elective Deferrals and Qualified Matching Contributions (to the extent used in the ADP test) for the Plan Year. Distribution of Elective Deferrals that are Excess Contributions shall be made from the participant's Pre-tax Elective Deferral account before the participant's Roth Elective Deferral account, to the extent Pre-tax Elective Deferrals were made for the year, unless the participant specifies otherwise, in accordance with procedures established by the Plan Administrator. Excess Contributions shall be distributed from the participant's Qualified Nonelective Contribution account only to the extent that the Excess Contributions exceed the amount of Excess Contributions in the participant's Elective Deferral account and Qualified Matching Contribution account.

Definition:

"Excess Contributions" shall mean, with respect to any Plan Year, the excess of:

1. The aggregate amount of employer contributions actually taken into account in computing the ADP of Highly Compensated Employees for such Plan Year, over

2. The maximum amount of such contributions permitted by the ADP test (determined by hypothetically reducing contributions made on behalf of Highly Compensated Employees in order of the ADPs, beginning with the highest of such percentages).