XVII. Qualified Matching Contributions

Statement of Requirement: Code § 401(m); Reg. § 1.401(k)-6; Proposed Reg. §§ 1.401(k)-1(g)(5), 1.401(k)-6, 1.401(m)-1(d)(4) and 1.401(m)(5)

(Note to reviewer: If the Employer provides that all Matching Contributions will satisfy the conditions applicable to Qualified Matching Contributions, then separate accounting for Matching Contributions and Qualified Matching Contributions is not necessary.)

Sample Plan Language:

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

Definition:

"Qualified Matching Contributions" shall mean Matching Contributions that are nonforfeitable when made to the Plana llocated to employees, and that are distributable only in accordance with the distribution provisions (other than for hardships) a pplicable to Elective Deferrals.

(Note to reviewer: On January 18, 2017, proposed regulations were issued changing the definition of Qualified Matching Contributions (“QMACs”) in Reg. §§ 1.401(k)-6 and 1.401(m)-5. On July 20, 2018, those regulations were finalized. Both the proposed and final regulations provide that employer contributions qualify as QMACs if they satisfy applicable nonforfeitability and distribution requirements at the time they are allocated to participants’ accounts, but need not meet these requirements when they are contributed to the plan. The regulations apply to plan years beginning on or after July 20, 2018. However, taxpayers may rely on the proposed regulations for periods prior to the effective date, but no earlier than January 18, 2017. A plan may elect instead to use an effective date as early as January 18, 2017. If so elected, this definition should be appropriately date-restricted.)

Sample Adoption Agreement Language:

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

[ ] a. All participants

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

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

who make [ELECT ONE OR BOTH]:

[ ] a. Elective Deferrals

[ ] b. Employee Contributions

to the Plan.

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

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

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

The Employer shall not match amounts provided above in excess of [$ ], or in excess of [ ] percent, of the participant's Compensation.

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

[Note to reviewer: On January 18, 2017, proposed regulations were issued that change the definition of qualified matching contributions in Regulation §§ 1.401(k)-6 and 1.401(m)-5. Under the current regulations, employer contributions that qualify as Qualified Matching Contributions must be nonforfeitable when they are contributed to the plan. Under the proposed regulations, employer contributions to a plan will qualify as Qualified Matching Contributions if they satisfy applicable nonforfeitability and distribution requirements at the time they are allocated to participants’ accounts, but need not meet these requirements when they are contributed to the plan. The proposed regulations apply to taxable years beginning on or after they are finalized. Taxpayers, may however, rely on the proposed regulations for periods prior to the effective date, but no earlier than January 18, 2017. Therefore, a plan that chooses to follow the proposed regulations for the period beginning on or after January 18, 2017, may revise the definition of Qualified Matching Contribution above to read as follows:

“’Qualified Matching Contributions’ shall mean Matching Contributions that are nonforfeitable when allocated to Participants’ accounts in the Plan and that are distributable only in accordance with the distribution provisions (other than for hardships) applicable to Elective Deferrals.”)