Section 5. Qualified Automatic Contribution Arrangement

(Note to reviewer: The provisions in Section 5 are required only in a plan offering a QACA. If a plan includes a QACA, the plan must include the definitions in section 5.1(a). The Employer must contribute Default Elective QACA Deferrals pursuant to section 5.1(b). The Basic Matching Contribution is set forth in section 5.1(c) instead of section 3.1(a), above. The minimum vesting schedule for the ADP Test Safe Harbor Contributions is set forth in section 5.1(d) instead of section 3.1(c), above. The Notice requirement in section 3.2 is modified by the addition of the requirements set forth in Section 5.1(e).)

If elected by the Employer in the Adoption Agreement, the provisions of this Section 5 regarding a Qualified Automatic Contribution Arrangement (QACA) will apply.

5.1(a) Required Definitions for a QACA.

A “QACA” is a Safe Harbor CODA with an Automatic Contribution Arrangement that satisfies Sections 1 to 4 of this Article, as modified by Section 5 of this Article.

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An “Automatic Contribution Arrangement” is an arrangement under which, in the absence of affirmative election by a Covered Employee, a certain percentage of compensation will be withheld from the Covered Employee’s pay and contributed to the Plan as an Elective Deferral.

A “Covered Employee” is a Plan participant identified in the adoption agreement as being covered under the QACA.

“Default Elective QACA Deferrals” are the Elective Deferrals contributed to the Plan under the QACA on behalf of Covered Employees who do not have an affirmative election in effect regarding Elective Deferrals.

The “Default Percentage” is the percentage of a Covered Employee’s compensation contributed to the Plan as a Default Elective QACA Deferral for the Plan Year. The Default Percentage is specified in the Adoption Agreement.

5.1(b) Default Elective QACA Deferrals

Default Elective QACA Deferrals shall be made on behalf of Covered Employees who do not have an affirmative election in effect regarding Elective Deferrals. Default Elective QACA Deferrals shall cease when a Covered Employee makes an affirmative election regarding Elective Deferrals. The amount of the Default Elective QACA Deferral made for a Covered Employee each pay period is equal to the Default Percentage specified in the adoption agreement multiplied by the Covered Employee’s Compensation for the pay period. The Default Percentage must be (1) uniform for all Covered Employees, (2) cannot exceed 15% of a Covered Employee’s compensation (10% during the period ending on the last day of the first plan year which begins after the date on which the first Default Elective QACA Deferral is made with respect to such employee), and (3) at least:

i. 3 percent during the period that begins on the date the Covered Employee first

receives a Default Elective QACA Deferral under the Plan and ends on the last day of the next plan year (“initial period”),

ii. 4 percent during the first plan year following the initial period,

iii. 5 percent during the second plan year following the initial period, and

iv. 6 percent during all subsequent plan years.

(Note to Reviewer: Section 102 of the SECURE Act amended Code § 401(k)(13)(C)(iii) to increase the 10% cap on automatic elective contributions under a qualified automatic contribution arrangement to 15% (for periods following the initial period of automatic elective contributions described in Code § 401(k)(13)(C)(iii)(I), effective for plan years beginning after December 31, 2019. Section 5.1(b)(2) above only reflects the statutory ceiling limit.)

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5.1(c) Basic Matching Contributions

In lieu of the Basic Matching Contribution amount described in section 3.1(a), the Basic Matching Contribution is equal to (i) 100 percent of the amount of the employee's Elective Deferrals that do not exceed 1 percent of the employee's Compensation for the Plan Year, plus (ii) 50 percent of the amount of the employee's Elective Deferrals that exceed 1 percent of the employee's Compensation but that do not exceed 6 percent of the employee's Compensation.

5.1(d) ADP Test Safe Harbor Vesting

In lieu of the immediate non-forfeitability requirement described in section 3.1(c), ADP Test Safe Harbor Contributions must be nonforfeitable for any employee who completes two years of service creditable for vesting purposes. The vesting percentage applicable to the first year of service will be as elected by the Employer in the adoption agreement.

5.1(e) Notice

In addition to the requirements set forth in section 3.2, above, the Employer will provide each Eligible Employee a Notice describing the employee’s rights and obligations under the automatic contribution arrangement. Notice must be provided sufficiently in advance so that an Eligible Employee has a reasonable period of time after receipt to make an affirmative election including, if applicable, how Elective Deferrals will be invested. Notwithstanding the foregoing, however, Default Elective QACA Deferrals may not begin later than (i) the pay date for the second payroll period that begins after the date the Notice is provided; and (ii) the first pay date that occurs at least 30 days after the Notice is provided. The Notice must advise Participants of the amount of Default Elective QACA Deferrals, and their right under the arrangement to elect not to have Elective Contributions made on the employee’s behalf (or to elect to have such contributions made at a different percentage), that an Eligible Employee can elect not to have Elective Contributions made (or elect an alternate Elective Contributions rate), and if applicable, determine how Elective Contributions will be invested in the absence of any affirmative election by the Employee.

(Note to reviewer: An automatic contribution arrangement must provide each affected employee with an effective opportunity to make or change their cash or deferred election at least once during each plan year. See Reg. §§ 1.401(k)-1(e)(2)(ii) and 1.401(k)-3(j)(1)(ii). See also Part A of Notice 2024-2.)

Sample Adoption Agreement Language:

Article [ ] Safe Harbor CODA Provisions

[ ] If checked, the Safe Harbor CODA provisions of Article [ ] apply.

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(INSERT SECTION OF THE PLAN CORRESPONDING TO NON-QACA SAFE HARBOR PROVISIONS)