XVIII. Nonforfeitability and vesting

Statement of Requirement: Code §§ 401(k)(2)(C), 401(m)(4)(C)(ii), 411(a)(1) and 411(a)(3)(G)

(Note to reviewer: An employee's right to his or her accrued benefit derived from Employee Contributions and Elective Deferrals made pursuant to his or her election must be nonforfeitable. Except as provided in CODA LRMs XI and XIV and discussed in the Reviewer Notes to those sections, Qualified Nonelective Contributions and Qualified Matching Contributions must be nonforfeitable when made to the plana llocated to participants.)

Sample Plan Language:

The participant's accrued benefit derived from Elective Deferrals, Qualified Nonelective Contributions, Employee Contributions, and Qualified Matching Contributions is nonforfeitable. Separate accounts for Elective Deferrals other than Roth Elective Deferrals, Roth Elective Deferrals, Qualified Nonelective Contributions, Employee Contributions, Matching Contributions, and Qualified Matching Contributions will be maintained for each participant. Each account will be credited with the applicable contributions and earnings thereon.

Matching Contributions (including Qualified Matching Contributions) must be forfeited if the contributions to which they relate are Excess Deferrals (unless the Excess Deferrals are for nonhighly compensated employees), Excess Contributions, or Excess Aggregate Contributions.

(Note to reviewer: On July 20, 2018, final regulations were issued changing the definition of QMACs and QNECs in Regulation §§ 1.401(k)-6 and 1.401(m)-5. The final regulations provide that employer contributions qualify as QMACs and QNECs 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,

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

taxpayers may rely on the proposed regulations for periods prior to the effective date, but no earlier than January 18, 2017. The definitions of QMACs and QNECs are revised as provided in CODA LRMs XI and XIV.)

[Note to reviewer: On January 18, 2017, proposed regulations were issued that change the definitions of Qualified Matching Contributions and Qualified Nonelective Contributions in Regulation §§ 1.401(k)-(6) and 1.401(m)-(5). Under the current regulations, employer contributions that qualify as Qualified Matching Contributions and Qualified Nonelective 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 and Qualified Nonelective 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 not 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 definitions of Qualified Matching Contribution and Qualified Nonelective Contribution as provided in LRMs XI and XIV.