CYCLE A Submission Period – 02/01/2016 – 01/31/2017

Employee                                                  Explanation No. 12

Benefit                                                   Section 401(k) 

                                                          Requirements
Plans

Note:                                                     The purpose of Worksheet Number 12 (Form 9002) and this 
                                                          explanation is to identify major problems that relate to plans 
Plans submitted during the Cycle A submission period      that include a cash or deferred arrangement.
must satisfy the applicable changes in plan qualification 
requirements listed in Section IV of Notice 2015-84,      Generally, a “Yes” answer to a question on the worksheet in-
2015-52 I.R.B. 1 (the 2015 Cumulative List).              dicates a favorable conclusion, while a “No” answer signals 
                                                          a problem concerning qualification of the arrangement and/
This publication contains copies of:                      or plan. This rule may be altered by specific instructions for a 
Form 9002, Worksheet 12                                   given question. Please explain any “No” answer in the space 
Form 9417, Deficiency Checksheet 12                       provided on the worksheet

These forms are included as examples only                 The sections cited at the end of each paragraph of this expla-
and should not be completed and returned                  nation are, except as otherwise noted, to the Internal Reve-
to the Internal Revenue Service.                          nue Code and the final Income Tax Regulations.

                                                          The technical principles in this publication may be changed 
                                                          by future regulations or guidelines.

Publication 7335 (Rev. 4-2016)  Catalog Number 49200Y  Department of the Treasury  Internal Revenue Service  www.irs.gov

Page 2                                  CYCLE A Submission Period – 02/01/2016 – 01/31/2017

I. Applicability

Section 401(k) of the Code is the exclusive method of deferring compensation on an elective, pre-tax basis under a qualified plan. This 
section sets forth the requirements that a cash or deferred arrangement (CODA) must satisfy in order to be a qualified arrangement. 
These requirements include a special nondiscrimination test called the actual deferral percentage or ADP test. If the requirements of 
section 401(k) are met, contributions under a qualified plan that are made pursuant to an employee’s deferral election are not taxed to 
the employee at the time contributed to the plan or when the amounts would have been available to the employee in cash had there 
been no deferral election, but are treated as employer contributions to the plan. Roth elective contributions (sometimes called designat-
ed Roth contributions), which are permitted in 401(k) plans beginning in 2006, also must meet the requirements applicable to tradition-
al elective contributions (pre-tax elective contributions), but Roth elective contributions are not excluded from the employee’s gross 
income.
401(k), 402(e)(3), 402A
1.401(k)-1(a)(4)

a. Existence of a Cash or Deferred Arrangement (CODA ). A plan includes a CODA if it includes any arrangement under which an 
eligible employee may make a cash or deferred election to have the employer either contribute an amount to the plan’s trust or to pay 
the amount to the employee in cash or some other taxable benefit. For example, a CODA would include an arrangement that permits 
an employee to elect to receive cash or to accrue a benefit under a defined benefit plan. (However, see I.b., below.) A cash or deferred 
election is an election (or a modification of an earlier election) that is made at any time permitted by the plan with respect to cash or oth-
er amounts that are not currently available to the employee and that are not designated or treated as after-tax employee contributions 
at the time of deferral or contribution.
401(k)(2)(A)
1.401(k)-1(a)(2) and (3)

b. Plans Which May Include a CODA. CODAs are allowed in profit-sharing plans, stock bonus plans, rural cooperative plans (as de-
fined in section 401(k)(7)), and money purchase pension plans that on June 27, 1974 included a CODA (pre-ERISA money purchase 
plans defined in section 401(k)(6)). A plan which is not described in one of these categories and which includes a CODA will not satisfy 
section 401(a). A CODA that is maintained by a state or local government will not be a qualified CODA if the CODA is adopted after 
May 6, 1986. CODAs adopted by state and local governments on or before this date will be qualified CODAs if the other requirements 
of section 401(k) are met. A CODA adopted by a tax-exempt organization after July 1, 1986 and before January 1, 1997 will not be a 
qualified CODA.
401(k)(1), (4)(B), (6) and (7))
1.401(k)-1(a)(1) and (e)(4)

IIII. Contributions

a. An election by the participant to defer compensation under a CODA must be in effect before such a deferral may be made and gen-
erally the contribution must be made after the performance of services with respect to which the contribution is made. Elective deferral 
agreements may be modified at any time permitted by the plan. A one-time irrevocable election to have a specified amount (including 
no amount) contributed to any plan of the employer, made at the time first eligible to participate in any plan of the employer, does not 
constitute a cash or deferred election. Any cash or deferred election must be made before the time at which the amount is currently 
available to the employee, i.e., before the employee may receive the amount. Rev. Ruls. 2009-31, 2009-39 I.R.B. 395, and 2009-32, 
2009-39 I.R.B. 398, provide guidance on contributing the cash value of unused leave to a CODA. A cash or deferred election does not 
include an election to defer amounts that have become currently available to the employee before the CODA is adopted. A CODA will 
not be qualified unless the amount the employee may defer is available to the employee in cash. For example, a CODA which allows 
an employee to receive a taxable benefit (other than cash) or to have a contribution made to the plan will not be a qualified CODA. A 
cash or deferred election will not fail to be made under a qualified CODA merely because, when an employee fails to make an affirma-
tive election with respect to an amount of compensation, that amount is contributed on the employee’s behalf (either as Roth or pre-tax 
elective contributions or a combination of both, as specified in the plan) to a trust (known as an “automatic enrollment” feature, or an 
“automatic contribution arrangement”), provided that the employee had an effective opportunity to elect to receive that amount in cash. 
A plan that permits Roth elective contributions must first allow pre-tax elective contributions. In other words, a plan cannot allow just 
Roth elective contributions. Roth elective contributions must be irrevocably designated as such by the employee before they go into the 
plan and must be treated by the employer as includible in the employee’s wages. Roth elective contributions are treated the same as 
pre-tax elective contributions for all purposes under the plan, but special rollover rules apply to these amounts.
401(k)(2)(A), 402A 
1.401(k)-1(a)(3), (e)(2) and (f)

b. Generally, a plan must separately account for elective contributions (i.e., employer contributions resulting from an employee’s elec-
tion to defer under a qualified CODA), and Roth elective contributions must be kept separate from pre-tax elective contributions, as well 
as from all other contributions. This does not mean that the plan must have actual separate accounts but that the plan must have some 
means of allocating and determining gains, losses, withdrawals, etc., separately for each type of contribution. Strict accounting with 
respect to Roth elective contributions is essential because all qualified distributions from Roth elective contribution accounts are com-
pletely tax-free. The employer must keep track of all amounts going into and out of each employee’s Roth elective contribution account.  
A Roth elective contribution account can accept rollovers from a participant’s other accounts in the same plan through an in-plan Roth 
rollover.

Page 3                                                                     CYCLE A Submission Period – 02/01/2016 – 01/31/2017
402A
1.401(k)-1(e)(3) and (f)(2)
Notice 2010-84, 2010-51 I.R.B. 872
Notice 2013-74, 2013-52 I.R.B. 819

c. Section 401(a)(30) requires a plan that accepts elective contributions to provide that a participant’s elective contributions for a cal-
endar year under the plan and all other plans, contracts and arrangements of the employer will not exceed the limit imposed by section 
402(g) of the Code for the calendar year with or within which the participant’s taxable year begins. However, to avoid disqualification, 
the plan may provide for the distribution of excess deferrals made under the plan or plans of the same employer (or related employers) 
by no later than the first April 15 following the close of the year in which the excess arose. The limit under section 402(g) is adjusted 
for cost-of-living increases under section 402(g)(4). Any such adjustments will be in multiples of $500. The limit under section 402(g) 
is increased by the amount of catch-up contributions permitted under section 414(v) for participants aged 50 or over by the end of the 
taxable year. The dollar limit on catch-up contributions is adjusted for cost-of-living increases under section 414(v)(2)(C). Any such 
adjustments will be in multiples of $500. Different limits apply to catch-up contributions under SIMPLE 401(k) plans. Catch-up contribu-
tions are elective contributions that exceed a statutory or plan limit (in most cases, the 402(g) limit or the ADP limit) but are nevertheless 
permitted by participants aged 50 and over, provided they have the compensation to defer. Catch-up contributions are treated the same 
as other elective contributions under the plan but they are not counted in the ADP test nor as a key employee contribution when deter-
mining the contribution required for non-key employees in top-heavy years under section 416.  See also VII.c.
401(a)(30), 402(g) and 414(v)
1.402(g)-1(e)
1.414(v)-1

III. Coverage And Participation

a. Employees eligible under a CODA must satisfy the percentage test of section 410(b)(1)(A), the ratio test of section 410(b)(1)(B), or 
the average benefits test of section 410(b)(1)(C). For purposes of the coverage requirements, all eligible employees under the CODA 
are treated as benefiting under the CODA. The term “eligible employee” means any employee who is directly or indirectly eligible to 
make a cash or deferred election, including an employee who has reached the limit on annual additions under section 415 and an em-
ployee whose eligibility to make an election has been suspended because of a distribution, loan or an election not to participate in the 
plan. However, an employee who makes a one-time election, upon first becoming eligible under any plan of the employer, not to defer 
for the duration of employment is not considered an eligible employee. For special rules that apply if an employer elects to apply section 
410(b)(4)(B) relating to the exclusion of certain employees, see Part V, Line b. (i). Finally, for purposes of determining if an arrangement 
satisfies coverage, the aggregation rules discussed under Discrimination apply. (See Part V.) The application for determination should 
include a demonstration that the CODA satisfies the coverage requirements. 
401(k)(3)(A)(i) 
1.401(k)-1(b)(1) and -6

b. A qualified CODA may not impose an age or service requirement for participation in the CODA which requires more than one year of 
service or a minimum age greater than 21.
401(k)(2)(D)

IV. Vesting

a. Section 401(k)(2)(C) of the Code requires that elective contributions and other contributions that may be treated as elective contri-
butions, as described in V. and VI. below, must be nonforfeitable when made to the plan. In order for a contribution to be nonforfeitable 
each participant, regardless of age or service, must immediately be vested in his or her elective contributions. 
401(k)(2)(C)
1.401(k)-1(c)

V. Discrimination

a. (i) and (ii). A plan that includes a CODA must provide that the actual deferral percentage (ADP) test set forth in section 401(k)(3)
(A) will be met. A governmental plan (within the meaning of section 414(d)) is treated as satisfying this test, and special rules apply in 
the case of certain collectively bargained plans. Section 401(k)(3) is the exclusive nondiscrimination test applicable to the amount of 
elective contributions under a qualified CODA. A plan with elective contributions under a qualified CODA will satisfy section 401(a)(4) 
only if the amount of elective contributions satisfies section 401(k)(3). For calendar years beginning after December 31, 1996, a plan 
subject to section 401(k) is deemed to satisfy the ADP test if it contains, and complies in operation with, “SIMPLE” provisions or, for plan 
years after 12/31/98, “Safe Harbor CODA” provisions, or, for plan years after 12/31/2007, Qualified Automatic Contribution Arrange-
ment (QACA) provisions. SIMPLE provisions are described in sections 401(k)(11) and 401(m)(10) of the Code. (See Part IX.) Safe 
Harbor CODA provisions are described in sections 401(k)(12) and 401(m)(11). (See Part X.) QACA provisions are described in sections 
401(k)(13) and 401(m)(12). (See Part XI). For plan years beginning after December 31, 1996, the ADP test compares the average of 
the actual amounts deferred for the plan year, as a percentage of compensation, by the eligible highly compensated employees to the 
average of the actual amounts deferred, again as a percentage of compensation, by the eligible nonhighly compensated employees for 
the prior plan year. “Catch-up contributions” described in section 414(v) are ignored for purposes of the ADP test. (See Part II.c.) The 
plan year being tested is sometimes referred to as the “testing year,” and this method of performing the ADP test, the “prior year testing 
method.” (See explanation VIII.c. for the definition of compensation.) The ADP test is computed by first separately calculating the actual 

Page 4                                                                          CYCLE A Submission Period – 02/01/2016 – 01/31/2017
deferral ratios (“ADRs”) of each eligible employee and then averaging the ratios of all eligible employees in the highly compensated 
and non-highly compensated groups. The individual ratios as well as the group percentages must be calculated to the nearest one-hun-
dredth of one percent. The average percentage deferred by the eligible highly compensated employees may not exceed the greater 
of: 1) 1.25 times the average of the deferral ratios for the eligible nonhighly compensated employees for the prior plan year; or, 2) the 
lesser of a) two times the average of the deferral ratios for the eligible nonhighly compensated employees for the prior plan year, or b) 
two plus the average of the deferral ratios for the eligible nonhighly compensated employees for the prior plan year.

Example:

Employee          Compensation    Deferral         ADR   ADP

A                 $100,000        $6,500           6.50%
B                 $90,000         $4,000           4.44% 5.31%
C                 $80,000         $4,000           5.00%
D                 $20,000         $0               0.00%
E                 $10,000         $0               0.00% 3.33%
F                 $10,000         $1,000           10.00%

(D, E, and F are nonhighly compensated employees, and the figures shown for them in this table are for the prior plan year. 

All employees are under age 50.) Under the ADP test, the employer must compare the ADP of the eligible highly compensated em-
ployees (A, B, and C) to the ADP of the eligible nonhighly compensated employees for the prior plan year, using the formulas above to 
determine whether 1) or 2) is met.

1) 3.33 x 1.25=4.16. Since 5.31 is greater than 4.16, Test 1) is not met.

2) 3.33 x 2=6.66, 3.33 + 2=5.33; 5.33 is the lesser of the two. Since 5.31 is less than 5.33, Test 2) is met and the plan passes the 
ADP test.

For the first plan year a plan is subject to section 401(k), the employer can elect, by so providing in the plan, to use either 3 percent 
as the ADP of the nonhighly compensated employees or the ADP for that first plan year. This election is not available if the plan is a 
“successor plan,” i.e., at least half the eligible employees under the plan were eligible under another section 401(k) plan of the employer 
in the prior year.

If elected by the employer, by so providing in the plan, the ADP test can be applied by comparing the current plan year’s ADP for highly 
compensated employees with the current, rather than the prior, plan year’s ADP for nonhighly compensated employees. This method of 
ADP testing is called the “current year testing method.” Note that the plan must specify whether the prior year or the current year testing 
method will be used. If the employer has elected to use the current year testing method, switching to prior year testing can only be done 
if the plan meets the requirements for changing to prior year testing set forth in regulations section 1.401(k)-2(c)(1). Generally, a plan 
can switch from current year testing to prior year testing only if 1) the employer has been involved in a merger, acquisition or similar 
transaction, and as a result, plans using different testing methods are maintained; and 2) the plan has used current year testing for the 
past 5 years. A plan can be amended anytime to use the current year testing method for a future plan year.

The plan must provide that it will meet the ADP test (unless it contains SIMPLE provisions, Safe Harbor CODA provisions, or QACA 
provisions). (A plan may not provide for “default ADP testing;” i.e., if the plan fails to satisfy the requirements for non-ADP testing, then 
the ADP test will be performed.) However, in lieu of stating the ADP test, the plan may incorporate by reference the provisions of section 
401(k)(3) and the regulations thereunder. The following discussion summarizes the principal requirements of these regulations. A plan 
that sets forth the ADP test in lieu of incorporating it by reference must describe the test in a manner which satisfies these requirements, 
including whether it is using the current or prior year testing method and, if using the prior year testing method, whether 3 percent or the 
first plan year’s ADP is to be used for the non-highly compensated employees for the first testing year. (Also see VII.c. regarding the 
effect of distributions of excess deferrals on the calculation of the ADP test.)
401(k)(3)(A)(ii), (3)(G), (11), (12) and (13)
414(v)(3)(B)
1.401(k)-1(a)(4)(iv), (b), (e)(7), -2(c), -3 and -4

b. (i) Eligible Employees. The actual deferral ratios of all eligible employees must be taken into account for the ADP test. For this pur-
pose, the term “eligible employee” has the same meaning as discussed under Coverage and Participation (see explanation Ill.a.). If an 
eligible employee has not made an elective deferral, the deferral ratio is zero and must be included in the ADP of the applicable group 
(either the highly compensated group or the non-highly compensated group).

Some plans have tried to base the ADP test only upon participants, rather than eligible employees. They then define “participant” as any 
employee who chooses to make an elective deferral. This definition inflates the deferral percentage by ignoring all the employees who 
would otherwise be counted in the ADP test as having deferral ratios of zero percent. This is not a permissible definition of participant 
for the purposes of calculating the deferral percentage.
1.401(k)-1(b)(1) and -2

Page 5                                                                CYCLE A Submission Period – 02/01/2016 – 01/31/2017

For plan years beginning after 12-31-98, if an employer elects to apply section 410(b)(4)(B) (relating to exclusion of employees not 
meeting the statutory minimum age and service requirements), in determining whether a CODA meets section 410(b)(1) the plan may 
provide that, in determining whether the CODA meets the ADP test, all eligible employees (other than HCEs) who have not met the 
minimum age and service requirements of section 410(a)(1)(A) (age 21 and 1 year of service) are excluded.
401(k)(3)(F) 
1.401(k)-2(a)(1)(iii)

(ii) and (iii) Contributions Taken Into Account. In running the ADP test for a plan year, an elective contribution is to be taken into account 
only if it relates to compensation that either (a) would have been received by the employee in the plan year but for the deferral election, 
or (b) if the plan specifically provides, is attributable to services performed by the employee in the plan year and would have been re-
ceived by the employee within 2½ months after the close of the plan year but for the deferral election. In addition, an elective contribu-
tion is to be taken into account under the ADP test for a plan year only if it is allocated to the employee as of a date within the plan year. 
An elective contribution is considered allocated as of a date within the plan year if the allocation is not contingent on the performance 
of services after that date and the contribution is actually paid to the trust by the last day of the 12th month after the end of the plan 
year. (Note that Department of Labor regulations at 29 CFR 2510.3-102 require that money withheld from an employee’s paycheck be 
deposited into the plan as of the earliest date such money can be segregated from the employer’s general assets but not later than the 
15th business day after the month the money was withheld.  The Regulations were  amended on  January 14, 2010, providing a 7-busi-
ness-day safe harbor for plans with less than 100 participants.) An elective contribution which does not relate to the current plan year’s 
compensation or which is not allocated during the plan year to which it relates is not eligible to be tested under the ADP test. Instead, 
the contribution must satisfy section 401(a)(4) for the plan year in which it is allocated as if it were the only employer contribution for 
that year.
1.401(k)-2(a)(4) and (5)

Under certain circumstances, an employer may treat certain nonelective contributions (i.e., qualified non-elective contributions or 
QNECs) and certain matching contributions (i.e., qualified matching contributions or QMACs) as elective contributions for purposes of 
the ADP test.  If the terms of the plan provide for this, then Part VI. of the worksheet should also be completed. 
1.401(k)-2(a)(6)

(iv) and (v) Aggregation. If an employer maintains more than one CODA, the following aggregation rules apply. When two or more plans 
are treated as a single plan for purposes of section 401(a)(4) or 410(b) (other than the average benefits test under section 410(b)(2)(A)
(ii)), all CODAs included in such plans are treated as a single CODA for purposes of the ADP test as well as for the purposes of section 
401(a)(4) and 410(b). Two or more CODAs may be permissively aggregated if the aggregated CODAs satisfy the ADP test. Plans may 
not be permissively aggregated unless they have the same plan year and use the same testing method (either all current or all prior). 
In this case the aggregated CODAs and the plans are treated as a single CODA and a single plan for purposes of sections 401(a)(4), 
401(k) and 410(b). After the effective date of the final 401(k) and 401(m) regulations, an ESOP may be aggregated with a non-ESOP for 
purposes of the ADP (and ACP) test, only. Notwithstanding the foregoing, a plan covering collective bargaining unit employees may not 
be aggregated with one that does not cover such employees. In addition, the following single plans must be separated into component 
plans and tested separately: 1) plans which benefit employees covered by a collective bargaining agreement and employees covered 
under another, or no, collective bargaining agreement; 2) plans covering employees of two or more qualified separate lines of business 
(unless the special rule for employer-wide plans in section 1.414(r)-1(c)(2)(ii) of the regulations apply); and 3) plans covering employees 
of more than one employer not pursuant to a collective bargaining agreement. However, an employer may elect to treat two or more 
collective bargaining agreements as one collective bargaining agreement, so that employees covered under different collective bargain-
ing agreements will be treated as if covered under a single plan. This election can only be made if the combinations are reasonable and 
reasonably consistent from year to year.

When plans are combined, or plan eligibility is changed, and the employer is using the prior year testing method, the ADP for non-highly 
compensated employees is the sum of the ADPs of the employer’s plans these employees were in during the preceding year, with each 
such plan’s preceding year ADP reduced to reflect the proportion of non-highly compensated employees from that plan in the present 
plan. 

Example: 

In Year 1, an employer had three plans subject to section 401(k), with the ADPs for nonhighly compensated employees being 2, 3 
and 4 percent. In Year 2, the plans are properly combined, resulting in one plan with 400 eligible nonhighly compensated employees: 
200 from the 2-percent plan and 100 from each of the other two plans. Using the prior year testing method for Year 2, the ADP is 
2.75. [(2 X 200/400) + (3 X 100/400) + (4 X 100/400)=2.75]

Repeated plan amendments to inflate the ADP of highly compensated employees could cause the plan to fail the nondiscrimination 
requirement of Code section 401(k)(3), even if the ADP test is passed.

Elective contributions may not be used to satisfy minimum contributions or benefit requirements under section 416 or (except to the 
extent provided in section 401(k) or (m)) to enable any other plan to meet the requirements of section 401(a) or 410(b). (See explana-
tion VI.) 

Whenever a highly compensated employee is eligible under more than one CODA of the same employer, this employee’s actual 

Page 6                                                            CYCLE A Submission Period – 02/01/2016 – 01/31/2017
deferral ratio is calculated by treating all the CODAs as one CODA. Thus, in this situation, the highly compensated employee’s actual 
deferral ratio will be the same under all CODAs in which he or she is eligible to participate. This rule does not apply to employees who 
are not highly compensated. Also, this rule does not apply in the case of contributions to plans that may not be aggregated (unless the 
reason they can’t be aggregated is inconsistent testing methods (prior versus current year) or different plan years).

Note that a plan may not be restructured to satisfy the ADP test. 
401(k)(3) 
1.401(k)-1(b)(3), (4), -2(a)(3)(ii) and -2(c)(4)

(vi) Use of Relevant Plan Years. The plan must use the proper plan years when determining the ADRs of the highly compensated em-
ployees and of the non-highly compensated employees. As described in V.a., above, if the plan is using the prior year testing method, 
the ADP of highly compensated employees for a testing year is determined using current plan year (testing year) data while the ADP for 
non-highly compensated employees is determined using prior plan year data. Whether an eligible employee is in the highly compensat-
ed or non-highly compensated group, or both, is based on his or her status in the current and prior plan years. Similarly, if the plan is 
using the current year testing method, the ADPs of both highly compensated employees and non-highly compensated employees (and 
their identity as one or the other) for a testing year are determined using current plan year (testing year) data. 
401(k)(3)

c. In addition to satisfying the ADP test, a plan that includes a qualified CODA must also satisfy section 401(a)(4) with respect to the 
availability of benefits, rights, and features under the plan, including the right to make each level of elective contributions. To satisfy this 
availability requirement, a benefit, right or feature must be available to a group of employees that satisfies section 410(b). Any limitation 
on the percentage of compensation (such as the definition of compensation subject to a deferral election) that may be deferred which 
favors highly compensated employees will cause both the CODA and the plan to fail to be qualified. A CODA may not be integrated with 
Social Security, although the underlying profit-sharing or stock bonus plan may be so integrated.

A plan that permits catch-up contributions under section 414(v) will not violate section 401(a)(4) (because some employees can defer 
more than others), provided the ability to make such contributions is universally available to employees (other than collectively bar-
gained employees described in section 410(b)(3)) aged 50 and over. All elective deferral plans of the employer must be considered 
for this rule and “employer” is determined after the application of section 414(b), (c), (m) and (o). (See Part II.c. for more on catch-up 
contributions.)

A CODA will not be qualified if any other benefit is directly or indirectly conditioned on whether or not the employee chooses to defer. 
Examples of such benefits are benefits under a defined benefit plan, nonelective employer contributions (other than matching contribu-
tions resulting from the deferral), plan loans, increases in salary and bonuses, and medical, dental, and vacation benefits. 
414(v)
1.401(a)(4)-4 
1.401(k)-1(a)(4)(iv) and (e)(6) 
1.414(v)-1(e)

VI. Qualified Nonelective Contributions (QNECs) And Qualified Matching Contributions (QMACs)

Under certain circumstances, an employer may treat qualified nonelective contributions (QNECs) as elective contributions for purpos-
es of the ADP test. QNECs are employer contributions, other than matching contributions, which are not subject to employee election, 
are fully vested when made to the plan, and are subject to the distribution restrictions that apply to elective contributions regardless of 
whether they are actually taken into account for the ADP test. A plan must provide a definite allocation formula for QNECs. An employer 
may also, under certain circumstances, treat certain matching contributions as elective contributions. Matching contributions that are el-
igible to be treated as elective contributions are referred to as qualified matching contributions (QMACs). A QMAC, like a QNEC, is fully 
vested when it is made to the plan and is subject to the distribution restrictions applicable to elective contributions regardless of whether 
it is actually taken into account for the ADP test. Matching contributions do not violate the “fully vested when made to the plan” require-
ment if they may be forfeited because the contributions on which they were based were excess deferrals, excess contributions, excess 
aggregate contributions, or default contributions withdrawn under an eligible automatic contribution arrangement (EACA).

The practice of targeting QNECs at nonhighly compensated employees with the least salary (so-called “bottom-up leveling”) could 
result in some or all of such QNECs being ineligible for use in the ADP (or ACP) test.

A plan which provides for employee or matching contributions is subject to the requirements of section 401(m) of the Code. (See Work-
sheet #11.) Section 401(m) includes an actual contribution percentage (ACP) test which is identical to the ADP test except that employ-
ee and matching contributions are substituted for elective contributions. (However, QMACs that an employer takes into account for the 
ADP test are disregarded in performing the ACP test. Thus, the ACP test will not be relevant where there are no employee contributions 
and the only matching contributions are QMACs that are counted as elective contributions in the ADP test.) On the 401(m) side, the 
employer may, under certain circumstances, treat elective contributions under a CODA and/or QNECs as matching contributions for the 
ACP test. 

If a plan switches from the current year testing method to the prior year testing method, regulations sections 1.401(k)-2(a)(6)(vi) and 
1.401(m)-2(a)(6)(vi) limit the extent to which QNECs and QMACs may be taken into account in determining the NHCEs’ ADP or ACP for 
the prior year.

Page 7                                                                        CYCLE A Submission Period – 02/01/2016 – 01/31/2017

This part of the worksheet should be completed if the terms of the plan provide that QNECs and/or QMACs will be taken into account 
for the ADP test or if the plan provides that the employer will make additional QNECs or QMACs if necessary to satisfy the ADP test.
401(k)(3)(D), 401(k)(8)(E), 401(m)(3) and (m)(4)
1.401(k)-2(a)6) and -6
1.401(m)-2(a)(6) and -5 

a. (i) QNECs and QMACs must be fully vested (but see above for instances of when QMACs may be forfeited) when made to the plan, 
without regard to the participant’s age and service and without regard to whether the contribution is actually taken into account for the 
ADP test. Thus, forfeitures cannot be used as QNECs or QMACs because such contributions were not fully vested when made to the 
plan.
401(k)(3)(D)
1.401(k)-6

(ii) QNECs and QMACs may be distributed only under circumstances that also permit the distribution of elective contributions. (See 
VII.a. and b.) However, for plan years beginning after 1988, amounts attributable to QNECs and QMACs may not be distributed on 
account of hardship, unless credited to the employee’s account as of a date specified in the plan which may be no later than December 
31, 1988, or, if later, the end of the last plan year ending before July 1, 1989. Under the terms of the plan, QNECs and QMACs must be 
subject to these distribution limitations regardless of whether they are actually taken into account for the ADP test.
401(k)(3)(D) 
1.401(k)-6

b. If the plan provides that it will take QNECs and QMACs into account for purposes of the ADP test, it must limit the QNECs and 
QMACs that will be treated as elective contributions to those contributions that are made with respect to employees who are eligible 
employees under the CODA being tested. QNECs and QMACs cannot be used in an ADP test if they have already been used in an 
ACP test or another ADP test (e.g., in an ADP test in a plan that switches from current year testing to prior year testing) or have been 
used in a safe harbor CODA or a SIMPLE 401(k) plan. Furthermore, the plan must provide that such contributions will be treated as 
elective contributions only if the additional requirements described below and specified in section 1.401(k)-2(a)(6) of the regulations are 
satisfied.

The plan may incorporate these requirements by reference. 

1. The non-elective contributions, including QNECs treated as elective contributions for the ADP test and QNECs treated as matching 
contributions for the ACP test, satisfy section 401(a)(4)

2. The non-elective contributions, excluding QNECs treated as elective contributions for the ADP test and QNECs treated as match-
ing contributions for the ACP test, satisfy section 401(a)(4). (QNECs allocated to the accounts of NHCEs and HCEs for the same 
plan year are subject to the requirements of section 401(a)(4) for that plan year even if the plan is using the prior year testing method 
whereby the QNECs for the NHCEs and HCEs are taken into account for the ADP test in different years.) 

3. The QNECs and QMACs are allocated to the employee within the relevant plan year and are actually paid to the trust on or before 
12 months after the end of that plan year. (See explanation V.b.(iii) regarding when a contribution is considered allocated within a 
plan year for this purpose.) 

The plan which treats QNECs and QMACs as elective contributions and the plan to which the QNECs and QMACs are made must 
have the same plan year and otherwise could be aggregated for purposes of ADP testing. Thus, QMACs made under a plan that uses 
current year testing could not be used in a CODA that uses prior year testing.

A QNEC that exceeds 5 percent of the non-highly compensated employee’s compensation (10 percent in the case of Davis-Bacon-type 
plans) cannot be counted in the ADP test if it is greater than twice the lowest QNEC and QMAC percentage given to at least half the 
eligible nonhighly compensated employees. A similar rule applies to matching contributions, including QMACs used in the ADP test.

Example:

An employer has four nonhighly compensated employees eligible for its CODA and they have compensation for the plan year of 
$1,000, $10,000, $20,000 and $50,000. If the employer makes a flat-dollar QNEC to these employees of $200, which as a percent-
age of compensation is 20%, 2%, 1% and 0.4%, respectively, no more than 5% of the $1,000 employee’s QNEC can be used in the 
ADP test because the most that half these employees got was a 2% QNEC and twice 2% is only 4%. Prior to the final section 401(k) 
and (m) regulations, the full 20% could have been used to raise the ADP of the non-highly compensated employees.
401(k)(3)(D) 
1.401(k)-2(a)(6)

VII. Distributions/Corrections

a. Elective contributions (and QNECs and QMACs), and the earnings attributable to such contributions, may only be distributed upon 
the earlier of death, disability, severance from employment or termination of the plan without establishment or maintenance of another 

Page 8                                                      CYCLE A Submission Period – 02/01/2016 – 01/31/2017
defined contribution plan (other than an ESOP, a SEP, a SIMPLE IRA plan, a section 403(b) plan or a section 457 plan) that benefits 
2 percent or more of the employees in the terminated plan.  The same distribution restrictions apply to amounts rolled over from a 
participant’s pre-tax elective contribution account into a Roth elective contribution account in the same plan through an in-plan Roth roll-
over.  Distributions permitted upon plan termination must be in a lump sum. An employee has a severance from employment when the 
employee ceases to be an employee of the employer maintaining the plan.  For years beginning after December 31, 2008, an employee 
may be treated as severed from employment and receive a distribution while performing service in the uniformed services provided that 
the employee may not make an elective deferral or employee contribution during the 6-month period beginning of the date of distribu-
tion.

In addition, for profit-sharing, stock bonus and rural cooperative plans, distributions upon attainment of age 59½ or because of partici-
pant hardship are permitted. For plan years after 1988, amounts attributable to QNECs and QMACs, and any income allocated to elec-
tive deferrals after a date specified in the plan which may be no later than December 31, 1988, or, if later, the end of the last plan year 
ending before July 1, 1989, may not be distributed on account of hardship. Amounts may not be distributed merely because of the lapse 
of a period of time (such as 2 years). A plan may also provide for distributions of excess contributions or deferrals (See VII.c., e., and f.). 

IRC section 401(k)(2)(B)(i)(V), added by section 827 of PPA’06 as amended by the HEART Act, permits reservists called to active duty 
after September 11, 2001, to take in–service distributions from a 401(k) plan. In addition, distributions may be made to participants 
affected by certain natural disasters, as described in the particular disaster legislation.  See IRC section 1400Q (for Hurricanes Katrina, 
Rita and Wilma)

This does not preclude distributions, even within the plan containing the CODA, of other amounts. For example: an employer maintains 
a profit-sharing plan containing a CODA feature that provides, in addition to contributions to the CODA, employer contributions which 
are neither QMACs nor QNECs. The plan may provide for distributions every 2 years (or upon any other stated event), out of these 
non-elective contributions. These nonelective contributions may not be taken into account for the ADP test. 
401(k)(2)(B), (7)(C) and (10)
414(u)(12)(B)
1.401(k)-1(d)
Notice 2013-74, 2013-52 I.R.B. 819

b. (i) and (ii) Profit-sharing, stock bonus and rural cooperative plans may make distributions of elective contributions on account of 
participant hardship. Such distributions must be in accordance with objective, nondiscriminatory standards set forth in the plan. The 
plan must state criteria for determining whether: i) the participant has an immediate and heavy financial need, and ii) the distribution is 
needed to satisfy the financial need.

Generally, a distribution may not be made unless the participant can meet these tests. Whether there is an immediate and heavy finan-
cial need is a question of facts and circumstances. However, a distribution made on account of (i) medical expenses described in sec-
tion 213(d) of the Code; (ii) the purchase of a principal residence for the employee; (iii) the payment of college/graduate school tuition 
(for the next 12 months) for the employee, the employee’s spouse, children or other dependents, or the employee’s primary beneficiary 
under the plan; (iv) the need to prevent eviction of the employee or foreclosure on his or her principal residence; (v) burial or funeral ex-
penses of a parent, child, spouse, dependent, or primary beneficiary under the plan; or (vi) casualty damage to the employee’s principal 
residence is deemed to be on account of an immediate and heavy financial need. 

A distribution is not necessary to satisfy the need to the extent it exceeds the amount required (including any government tax or pen-
alty) or to the extent the need can be met from other resources reasonably available to the employee. A distribution may be treated as 
necessary to satisfy the need (and the plan may so provide) if the employer relies on the employee’s written representation (unless the 
employer has actual knowledge to the contrary) that the need cannot be reasonably relieved by insurance reimbursement, reasonable 
liquidation of the employee’s assets or the assets of the employee’s spouse and minor children that are reasonably available to the 
employee, cessation of elective deferrals or employee contributions, borrowing from commercial sources, or other distributions or non-
taxable loans from any employer. A distribution is deemed necessary to satisfy the need (and the plan may so provide) if the following 
requirements are satisfied:

1. the amount of the distribution does not exceed the need; 

2. the employee has obtained all distributions (other than hardship distributions) and nontaxable loans available under the plans of 
the employer; and 

3. the employee is prohibited by a legally enforceable agreement or by the terms of the plan from making elective and employee 
contributions to all plans of the employer (other than contributions to health or welfare benefit plans or mandatory contributions to a 
defined benefit plan), including non-qualified plans and cafeteria plans, for at least 6 months following the distribution. 
401(k)(2)(B) and (7)(C)
1.401(k)-1(d)

c. Under section 402(g)(1), a participant generally may not defer an amount greater than the limit under section 402(g) in a taxable 
year, taking into account all the plans in which he or she participates. (See II.c. for the limit under section 402(g).) A plan must be written 
to preclude deferrals over the indexed amounts. A plan may provide a mechanism by which a participant can ask that all or a portion 
of his or her excess deferrals (arising from participation in plans of more than one employer), and the income allocable to that amount, 

Page 9                                                         CYCLE A Submission Period – 02/01/2016 – 01/31/2017
will be returned to him or her no later than April 15 of the year following the year in which the contributions were made. However, such a 
mechanism is not required as a condition of plan qualification.

Section 401(a)(30) requires as a condition of plan qualification that elective contributions under plan(s) of related employers not exceed 
the section 402(g) limit. A plan may provide that an employee is deemed to notify the employer of excess deferrals in this situation and 
the plan can distribute the excess by the first April 15 following the year in which the excess arose to avoid disqualification.

Such distributions may be made without spousal consent. If, after 2005, the plan permits Roth elective contributions, it may provide 
the ordering rules for distributions of excess deferrals. Alternatively, the plan may provide that the participant must choose whether the 
excess is distributed from his or her pre-tax or Roth elective contribution account, to the extent such type of contribution was made for 
the year. The amount to be distributed is the amount specified (or deemed specified) by the employee (not to exceed the elective defer-
rals under the plan for the year) plus allocable income or minus allocable loss. For 2007, allocable income or loss includes income or 
loss for the participant’s taxable year and income or loss for the period between the end of the taxable year and the date of distribution 
(the “gap period”).  (See regulations under 402(g) issued April 30, 2007.) For taxable years beginning before January 1, 2006, income 
or loss allocable to the gap period could be disregarded in determining income or loss on excess deferrals for such years. For years 
after 2007, allocable income or loss is determined only through the end of the taxable year of the excess, due to a WRERA retroactive 
amendment to Code section 402(g)(2)(A)(ii). The plan may use any reasonable method for calculating the income or loss, provided the 
method is used consistently and is the normal method used by the plan for allocating income or loss to participants’ accounts.

Alternatively, allocable income or loss for the taxable year is determined by multiplying the income or loss for the taxable year allocable 
to elective contributions by a fraction, the numerator being the excess deferrals of the employee for the taxable year and the denomina-
tor being the account balance attributable to elective contributions as of the end of the taxable year minus the income or plus the loss 
allocable to such account balance for the year. 

For years before 2008, the plan may determine the allocable income or loss for the “gap period” in a similar manner or, alternatively, it 
may determine income or loss for this period under a safe-harbor method as equal to 10 percent of the income or loss for the past tax-
able year times the number of months between the end of the year and the date of distribution, counting whole months only and treating 
distributions made after the first 15 days of the month as occurring on the first day of the next month.

A plan may provide that excess deferrals may be distributed in the year in which they were made, provided the employee and the plan 
designate the distribution as an excess deferral and the distribution is made after the date the excess deferral occurred.
In performing the ADP test, the plan must generally still count excess deferrals as elective contributions even if they have been dis-
tributed. However, excess deferrals made under an employer’s plan (and all plans of related employers) of a nonhighly compensated 
employee are not taken into account in the ADP test in that employer’s plans. (See VII.f.(iii) regarding the coordination of distributions of 
excess deferrals and distributions or recharacterization of excess contributions.) 

A distinction should be made between an excess deferral (i.e., an amount in excess of an individual participant’s section 402(g) elective 
deferral limit) and an excess contribution, which is a contribution on behalf of a highly compensated employee that is above the maxi-
mum deferral percentage allowed under the ADP test for a particular plan in a particular plan year.
401(a)(30) and 402(g)
1.401(a)-30(a) 
1.402(g)-1(e)

d. A plan may provide that the employer will make additional QNECs or QMACs in order to satisfy the ADP test. If this is the case, also 
complete Part VI. of the worksheet. (See the discussion of QNECs and QMACs in V. and VI.) In this event, further correction will not be 
required. Note, however, that if the plan provides for QMACs which are not treated as elective contributions for the ADP test, the plan 
is also subject to the requirements of section 401(m). The option of making additional QNECs or QMACs to pass the test is generally 
unavailable to plans using the prior year testing method because additional contributions have to be made to raise the ADP of nonhighly 
compensated employees no later than 12 months following the end of the plan year and this period has already expired when the test is 
run. For example, for the calendar-year 2009 testing year, the ADP test will be run in 2010, comparing the ADP of highly compensated 
employees for 2009 with the ADP of nonhighly compensated employees for 2008. Since contributions taken into account in determining 
the 2008 ADP would have had to be made before 2010, if the plan fails the ADP test, it is too late to make additional contributions.
401(k)(3)(D)
1.401(k)-2(a)(6)(i) and -2(b)(1)(i)(A)

e. If the deferral percentage limits determined using the ADP test described in section 401(k)(3) are exceeded and the employer will not 
be making any corrective contributions, the plan is required to distribute or recharacterize the excess contributions, plus any income 
attributable to the excess contributions in the case of a distribution, in order for the CODA to be qualified. Excess contributions are 
elective contributions (and QNECs and QMACs that are taken into account for the purpose of the ADP test) contributed on behalf of the 
highly compensated employees, which exceed the maximum permissible deferral percentage determined using the ADP test. A plan 
may use a combination of additional QNECs or QMACs, distribution and recharacterization, and may also permit or require a participant 
to designate which of the latter two methods will be used, and to what extent each of the latter two methods will be used, provided the 
method is described in the plan. Similarly, if Roth elective contributions are permitted under the CODA after 2005, the plan may desig-
nate or permit the participant to designate the source of distributions. A plan may not correct excess contributions by placing them in 
a suspense account or by leaving them unallocated. To avoid a discriminatory rate of match, a plan generally must also forfeit match-
ing contributions (even QMACs) that relate to contributions treated as excess deferrals (unless the excess deferrals are for nonhighly 

Page 10                                                                 CYCLE A Submission Period – 02/01/2016 – 01/31/2017
compensated employees), excess contributions, or excess aggregate contributions. Such a forfeiture will not cause the plan to violate 
section 411. 

Alternatively, the plan may contain a fail-safe formula or a procedure for prospectively reducing highly compensated employees’ elective 
contributions so that no excess contributions arise. 
401(k)(8) and 411(a)(3)(G) 
1.401(k)-2(b)

f. (i), (ii) The determination of the amount of excess contributions attributable to each highly compensated employee and the identity 
of the highly compensated employees who will have excess contributions distributed from their accounts is performed in two sepa-
rate steps. First, the total amount of excess contributions in the plan is calculated by determining the amount needed to be removed 
from the account of each highly compensated employee, working backward from the highly compensated employee with the greatest 
deferral ratio (“ADR”), so that the ratios remaining would pass the ADP test. Then, the amount so determined is distributed to highly 
compensated employees according to the dollar amount of their contributions used in calculating the ratio, beginning with the highly 
compensated employee with the greatest amount, until the total is distributed. However, if the highly compensated employee targeted 
for distribution has not reached his or her catch-up contribution limit for the year, the plan may not distribute the excess contributions to 
the extent of the unused catch-up contributions.

   Example: 

   Employee     Compensation      Deferral                 ADR          ADP

   A            $100,000     $7,000                  7.00%   
   B            $90,000      $6,500                  7.22%         6.41%
   C            $80,000      $4,000                  5.00%

   D            $20,000      $0                       0.00%
   E            $10,000      $0                       0.00%        3.33%
   F            $10,000      $10,000                 10.00%

D, E, and F are nonhighly compensated employees, and the figures shown for them in this table are for the prior plan year. All employ-
ees are under age 50.)

Under the ADP test, the greatest acceptable ADP for the highly compensated employees (A, B and C) is 5.33 (see example in V.a.). 
Since 6.41 is greater than 5.33, there are excess contributions. Since the plan is using the prior year testing method, contributing cor-
rective QNECs or QMACs to the nonhighly compensated employees is not an option; thus, the employer must distribute or recharacter-
ize the excess contributions.

In determining the amount of excess contributions, the proper procedure is to hypothetically reduce the highest ADR until the maximum 
allowed percentage (5.33) is achieved, or until the next highest ADR is reached, whichever occurs first (“ratio leveling method”). In this 
case, if B’s ADR is reduced to 7.00, the ADP will be 6.33. Since this is not sufficient to satisfy the ADP test, A and B’s ADRs must be 
further reduced to 5.50%. The amount of excess contributions is the difference between the contributions at the old ADRs ($7,000 and 
$6,500) and the contributions at the new ADRs ($5,500 and $4,950), for a total amount of $3,050. Assuming the plan corrects through 
distribution (and ignoring income or loss), this amount must then be distributed from the account(s) of the highly compensated em-
ployee with the highest dollar amount of contributions used in the ADP test for the plan year until the contributions remaining in such 
employee’s account equals the plan-year contributions in the highly compensated employee’s account(s) with the next highest dollar 
amount (“dollar leveling method”). Therefore, $500 must first be distributed to A, to make A’s contributions level with B’s, and the re-
maining amount of excess contributions, $2,550, is then allocated equally to A and B, so that each has $5,225 of elective contributions 
remaining for the year. (Note that the ADP test is deemed passed after these corrections even though running the test then would not 
produce a passing ADP for the highly compensated employees.) 
401(k)(8), 414(v)(3)(B) 
1.401(k)-2(b)(2)
1.414(v)-1(d)(2)(iii)

(iii) Any distribution of excess deferrals from the plan must be coordinated with the distribution or recharacterization of excess contribu-
tions as follows. (See VII.c. above.) First, if excess deferrals have previously been distributed for the employee’s taxable year ending 
with or within the plan year, then the plan must offset such distribution from the amount of the employee’s excess contributions to be 
distributed or recharacterized for that plan year. Second, the amount of excess deferrals that may be distributed by the plan for a tax-
able year of the employee must be reduced by the amount of excess contributions previously distributed or recharacterized for the plan 
year beginning with or within that taxable year. 
1.401(k)-2(b)(4)

(iv) Income or loss must be allocated to excess contributions which are to be distributed in the same manner as income or loss is 
allocated to excess deferrals, except that the plan year is substituted for the taxable year and excess contributions are substituted for 
excess deferrals in calculating the allocable income or loss. For plan years beginning before 2006, income or loss allocable to the “gap 
period” (the period between the end of the plan year in which the ADP was exceeded and the date of the distribution of excess contribu-

Page 11                                                             CYCLE A Submission Period – 02/01/2016 – 01/31/2017
tions) could be disregarded in determining income or loss on excess contributions for such years. (See VIl.c.) For plan years beginning 
after 2005 and before 2008, allocable income or loss included allocable income or loss for the gap period. For plan years beginning on 
or after January 1, 2008, allocable income or loss does not include allocable income or loss for the gap period.
401(k)(8) 
1.401(k)-2(b)(2)(iv) 

(v) A distribution of excess contributions must be made after the plan year in which the excess contributions were made. However, if a 
distribution of an excess contribution is not made before the end of the 12 months following the end of the plan year in which they were 
made, the CODA will fail to be qualified for the year in which the excess contributions were made and all subsequent years until correct-
ed. Moreover, if excess contributions are not distributed or recharacterized within 2½ months of the end of the plan year, the employer 
will be liable for a 10-percent excise tax on these contributions. Correction by QNECs or QMACs (only if using current year testing), 
even if after the 2½-month period, will enable the employer to avoid the 10-percent excise tax. The regulations provide that any distribu-
tion of excess contributions must be designated as such by the employer. For plan years beginning on or after January 1, 2008, in the 
case of a plan that includes an eligible automatic contribution arrangement (EACA), the 2½ month distribution deadline is extended to 6 
months in certain circumstances.  (See XII.)
401(k)(8), 4979
1.401(k)-2(b)(5)

g. Section 401(k)(8)(A)(ii) provides that a plan may use recharacterization as a means of eliminating excess contributions. Recharac-
terization involves treating excess contributions as employee contributions to the plan; that is, treating the transaction as a distribution 
followed by a contribution to the employee’s employee contribution account. Any amount so contributed must be included in the 401(m) 
(ACP) test. Although recharacterized excess contributions are treated as employee contributions for purposes of sections 72, 401(m) 
and 401(a)(4), for other purposes, including section 404, recharacterized amounts continue to be treated as employer contributions. 
Recharacterized amounts are includible in the employee’s gross income as if such amounts were distributed as excess contributions. 
Elective contributions may be recharacterized only in the plan in which they are made or under a plan with which that plan could be 
aggregated. Thus, elective contributions may not be recharacterized under a plan unless the plan has the same plan year as the plan 
under which the elective contributions were made and the same testing methods (prior year or current year) are involved. Generally, 
this will not be a problem as the plan to which the elective contributions were made will be the plan that recharacterizes.
401(k)(8)
1.401(k)-2(b)(3) 
1.401(m)-2(c)(3) 

(i) If a plan allows recharacterization it must do so in a nondiscriminatory manner. A plan which only allows employee contributions by 
way of recharacterization would be per se discriminatory because nonhighly compensated employees would have no opportunity to 
contribute. Similarly, the amount recharacterized, when added to the other employee contributions for the highly compensated employ-
ees, may not exceed the limits under the plan relating to employee contributions.
1.401(k)-2(b)(3)(iii)(B)

(ii)-(v) The plan must provide that the amount of excess contributions to be recharacterized will be determined using the “leveling” meth-
ods. Thus, in the example in VII.f.(i), if the excess contributions were to be recharacterized rather than distributed, the amount of excess 
contributions and the identity of the highly compensated employees to whom the excess is allocated would be the same. In addition, the 
amount to be recharacterized is offset by any amounts previously distributed as excess deferrals. Finally, recharacterization must take 
place within 2½ months of the end of the plan year to which the recharacterization relates. Recharacterization will be deemed to occur 
on the date on which the last affected highly compensated employee is notified of the recharacterization and the tax consequences of 
such recharacterization.
401(k)(8) 
1.401(k)-2(b)(3)(iii)(A)

VIII. Highly Compensated Employee/Compensation

a. and b. Section 414(q) of the Code defines “highly compensated employee.” This definition applies for purposes of section 401(k), 
including the ADP test. Effective for years beginning after December 31, 1996, the term “highly compensated employee” (HCE) means 
any employee who: 

1) was a 5-percent owner at any time during the year or the preceding year, or

2) for the preceding year had compensation (as defined in section 415(c)(3)) from the employer in excess of $80,000 and, if the em-
ployer so elects, was in the top-paid group for the preceding year. 

The $80,000 amount is adjusted at the same time and in the same manner as under section 415(d), except that the base period is the 
calendar quarter ending September 30, 1996.

The only regulations under section 414(q), Temp. Regs. section 1.414(q)-1T, were written before section 414(q) was amended by the 
Small Business Job Protection Act of 1996, effective for years after December 31, 1996. Consequently, portions of those regulations do 
not reflect current law.

Page 12                                                                         CYCLE A Submission Period – 02/01/2016 – 01/31/2017
HCE status is determined on the basis of the applicable year of the plan (“determination year”) and the preceding 12-month period 
(“look-back year”). The plan must take into account employees of all employers aggregated under section 414(b), (c), (m) and (o), in 
determining who is a HCE. Also, for this purpose, the term “employee” includes leased employees unless such employees are covered 
under a safe-harbor plan of the leasing organization and not covered under a qualified plan of the employer.
414(q)
1.414(q)-1T Q&A 6 and 7

An employer may make a top-paid group election for a determination year. The effect of this election is that an employee (who is not a 
5-percent owner at any time during the determination year or the look-back year) with compensation in excess of $80,000 (as adjusted) 
for the look-back year is an HCE only if the employee was in the top-paid group for the look-back year.

An employer may also make a calendar year data election for a determination year. The effect of this election is that the look-back year 
is the calendar year beginning with or within the look-back year. This election, once made, applies for all subsequent determination 
years unless changed by the employer. The plan may not use this election to determine whether employees are HCEs on account of 
being 5-percent owners.

An employer making one of the elections is not required also to make the other election. However, if both elections are made, the look-
back year in determining the top-paid group must be the calendar year beginning with or within the look-back year. These elections 
must apply consistently to the determination years of all plans of the employer, except that the consistency requirement will not apply to 
determination years beginning with or within the 1997 calendar year, and for determination years beginning on or after January 1, 1998 
and before January 1, 2000, satisfaction of the consistency requirement is determined without regard to any nonretirement plans of the 
employer.

If a qualified plan contains the definition of highly compensated employee, and an employer makes or changes either a top-paid group 
election or a calendar year data election for a determination year, a plan must reflect the choices made. Any retroactive amendments 
must reflect the choices made in the operation of the plan for each determination year. A highly compensated former employee is 
based on the rules applicable to determining highly compensated employee status as in effect for that determination year. See section 
1.414(q)-1T, A-4, of the temporary regulations and Notice 97-45.

c. Section 414(s) of the Code sets forth the definition of compensation that must be used for the ADP (and ACP) test.  Section 414(s) 
states that compensation “has the meaning given such term by section 415(c)(3)” but that alternative definitions in regulations under 
414(s) may also be used. Also, section 414(s) provides that the definition can exclude amounts not included in gross income under 
section 125, 132(f), 402(e)(3), 402(h), or 403(b).

Final regulations under section 415 were published on April 5, 2007, and are generally effective for limitation years beginning on or after 
July 1, 2007.  These regulations provide a comprehensive definition of 415(c)(3) compensation and three safe harbor definitions that 
automatically satisfy 415(c)(3) if specified in the plan.

Even if a plan incorporates the ADP test by reference, the plan must still include this definition.

The following definitions of compensation automatically satisfy section 414(s): 

1. Compensation within the meaning of section 415(c)(3). 

2. Compensation within the meaning of section 415(c)(3) reduced by all of the following: reimbursements or other expense allowanc-
es, fringe benefits, moving expenses, deferred compensation, and welfare benefits. 

Under any of these definitions, the employer can elect to include or exclude elective contributions not includible in income, section 
457(b) deferred compensation, qualified transportation fringe benefits excluded from income under section 132(f)(4) and section 414(h)
(2) pick-up contributions. If any of these are included (excluded), they must all be included (excluded).

A self-employed individual’s compensation cannot use 2 above; generally it is earned income as defined in section 401(c)(2). 

Other definitions of compensation may satisfy section 414(s) if they are reasonable, not designed to favor highly compensated em-
ployees, and if the facts and circumstances show that the average percentage of total compensation included for highly compensated 
employees as a group does not exceed the average percentage for nonhighly compensated employees by more than a de minimis 
amount. In this case, the employer must submit a demonstration that the definition is nondiscriminatory. Imputed compensation or com-
pensation defined in reference to an employee’s rate of compensation (rather than actual compensation) may not be used for purposes 
of the ADP (or ACP) test.

The period used to determine an employee’s compensation must be the plan year, the calendar year ending in the plan year, or the 
portion of either during which the employee was eligible under the plan.

Compensation taken into account cannot exceed the $200,000 compensation limit described in section 401(a)(17), as adjusted by the 
Secretary for increases in the cost of living. Such adjustments are made in multiples of $5,000. See Parts X and XI below for the defini-
tion of compensation for safe harbor 401(k) plans and QACAs.

Page 13                                                                        CYCLE A Submission Period – 02/01/2016 – 01/31/2017
401(a)(17), 401(k)(9), 414(s), 415(c)(3) 
1.401(k) -6
1.414(s)-1
1.415(c)-2

d. A cash or deferred election can only be made with respect to amounts that are compensation within the meaning of section 415(c)
(3). This rule is effective for compensation paid (or that would have been paid but for a deferral election) in plan years beginning on or 
after July 1, 2007.
1.401(k)-1(e)(8).

IX. SIMPLE Provisions

Sections 401(k)(11) and 401(m)(10) of the Code (401(k) SIMPLE provisions) were added by the Small Business Job Protection Act of 
1996 to provide, for years after 1996, an alter-native method of satisfying the ADP and ACP tests. In addition, a plan using the 401(k) 
SIMPLE provisions (a SIMPLE 401(k) plan) is not treated as top-heavy under section 416 of the Code.

A SIMPLE 401(k) plan can be used only by an employer “eligible employer.” An eligible employer means, with respect to any year, an 
employer that had no more than 100 employees who received at least $5,000 of compensation from the employer for the preceding 
year. In applying the preceding sentence, all employees of controlled groups of corporations under section 414(b), all employees of 
trades or businesses (whether incorporated or not) under common control under section 414(c), all employees of affiliated service 
groups under section 414(m), and leased employees required to be treated as the employer’s employees under section 414(n), are 
taken into account.

 An eligible employer that adopts a SIMPLE 401(k) plan and that fails to be an eligible employer for any subsequent year, is treated as 
an eligible employer for the 2 years following the last year the employer was an eligible employer. If the failure is due to any acquisi-
tion, disposition, or similar transaction, the preceding sentence applies only if the provisions of section 410(b)(6)(C)(i) are satisfied. The 
employer cannot have another plan covering employees who are eligible to participate in the SIMPLE 401(k). No contributions may be 
made during a year to a SIMPLE 401(k) plan, other than: (1) elective contributions of up to the “applicable dollar amount” (defined in 
section 408(p)(2)(E)) plus catch-up contributions described in section 414(v), if applicable, and (2) either employer matching contribu-
tions limited to 3 percent of employee’s compensation or employer nonelective contributions for all eligible employees equal to 2 per-
cent of employee’s compensation. The applicable dollar amount is adjusted by the Secretary of the Treasury for cost-of-living increases, 
in multiples of $500. The following additional requirements apply to SIMPLE 401(k) plans: 

1. the plan year must be the calendar year; 

2. all amounts contributed under the plan must be nonforfeitable at all times; 

3. the plan must use a special definition of compensation for purposes of applying the 401(k) SIMPLE provisions; and 

4. the plan must satisfy special notification and election period requirements. 

Except as provided above, all other qualification requirements of the Code continue to apply to a plan that contains 401(k) SIMPLE pro-
visions, including the contribution limitations of section 415 and the compensation limitations of section 401(a)(17). In addition, all other 
requirements applicable to 401(k) plans continue to apply, including the coverage and participation requirements (see Part III.), the dis-
tribution restrictions on elective contributions (see VII.a. and b.) and the general prohibition on State and local governments maintaining 
a 401(k) plan (see I.b.). 

If the plan contains 401(k) SIMPLE provisions, then this part of the worksheet must be completed.
401(k)(11), 401(m)(10), 414(v) 
1.401(k)-4
1.414(v)-1

a. Coverage Limitation. No contributions can be made, or benefits accrued for services during the year, on behalf of any eligible em-
ployee under any other plan, contract, pension, or trust described in section 219(g)(5)(A) or (B), maintained by the employer.
401(k)(11)(C)

b. Calendar-Year Requirement. The plan year of a SIMPLE 401(k) plan must be the calendar year. An eligible employer adopting a 
SIMPLE 401(k) plan for the first time can make it effective as of any date within a calendar year that is after the date of adoption but not 
later than October 1st of that calendar year (or as soon as administratively feasible if the employer comes into existence after October 
1). The coverage limitation of IX.a., above, still applies for the entire calendar year, and contributions and compensation are determined 
over the entire calendar year.
401(k)(11), 408(p)(6)(C) 
1.401(k)-4(e)(3), (4) and (g)

c. Compensation
For purposes of applying the 401(k) SIMPLE provisions, compensation means the sum of the wages, tips, and other compensation 

Page 14                                                           CYCLE A Submission Period – 02/01/2016 – 01/31/2017
from the employer subject to federal income tax withholding (as described in section 6051(a)(3)), the employee’s elective contributions 
made under the SIMPLE 401(k) plan or any other 401(k) plan, elective deferrals under a section 408(p) SIMPLE IRA plan, a SARSEP, 
or, a section 403(b) annuity contract and compensation deferred under, a section 457 plan, required to be reported by the employer on 
Form W-2 (as described in section 6051(a)(8)). Compensation also includes amounts paid for domestic service, as described in sec-
tion 3401(a)(3). Compensation does not include any amounts deferred by the employee pursuant to a section 125 cafeteria plan. For 
self-employed individuals, compensation means net earnings from self-employment determined under section 1402(a) prior to subtract-
ing any contributions made under the SIMPLE 401(k) plan on behalf of the individual. 

Compensation taken into account cannot exceed the $200,000 compensation limit described in section 401(a)(17), as adjusted by the 
Secretary for increases in the cost of living. Such adjustments are made in multiples of $5,000.
401(a)(17), 401(k)(11)(D), 408(p)(6)(A)
1.401(k)-4

d. Contributions
(i) Elective Contributions 
Each eligible employee must be allowed to have up to the applicable dollar amount under section 408(p)(2)(E) (as adjusted by the 
Secretary for any increases in the cost of living) of his or her compensation contributed to the plan for a calendar year. In addition, for 
participants aged 50 or over by the end of the year, an additional amount may be elected by the employee. The limit on these “catch-up 
contributions” is adjusted by the Secretary of the Treasury for cost-of-living increases, under section 414(v)(2)(C). The employer must 
contribute these elective contributions (also called elective deferrals) to the respective employees’ accounts in the plan. 
401(k)(11)(B), 414(v) 
1.401(k)-4

(ii) Matching and Nonelective Contributions
Each year, the employer must contribute a matching contribution to the plan for each employee who made elective contributions. The 
amount of matching contributions that must be made for each employee is equal to the employee’s elective contributions (including any 
catch-up contributions) for the calendar year; but the matching contributions cannot exceed 3 percent of the employee’s compensation 
(as limited by section 401(a)(17)) for that entire calendar year. 

For any year, instead of a matching contribution, the employer may elect to contribute a nonelective contribution equal to 2 percent of 
compensation (as limited by section 401(a)(17)) for the entire calendar year for each eligible employee who had compensation of at 
least $5,000 for the year. The plan can provide that the 2-percent nonelective contribution will be made for eligible employees making a 
lesser amount than $5,000, but such lesser amount must be specified in the plan and communicated to employees (see IX.f.). 
401(k)(11)(B) 
1.401(k)-4

(iii) Limitation on Other Contributions 
No employer or employee contributions may be made to a SIMPLE 401(k) plan for the year other than elective contributions described 
in (i), above, matching or nonelective contributions described in (ii), above, and rollover contributions described in section 1.402(c)-2, 
Q&A-1(a) of the regulations. 
401(k)(11)(B)
1.401(k)-4 

(iv) All benefits attributable to contributions made to a SIMPLE 401(k) plan must be nonforfeitable at all times.
401(k)(11)(A)(iii)

e. Employee Elections 
(i) During the 60-day period immediately preceding each January 1, and during any additional periods specified by the plan, each 
eligible employee must be permitted to make or modify an election to defer compensation. For the year an employee becomes eligible 
under the SIMPLE 401(k) plan, the 60-day election period requirement is deemed satisfied if the employee may make or modify an 
election during a 60- day period that includes either the date the employee becomes eligible or the day before. This means that if an 
employee becomes eligible on July 1, for example, he or she must be given a 60-day election period that ends on June 30th, or on 
August 28th, or on any date in between. Employee elections must be given effect as soon as practical after the employee becomes 
eligible. 
401(k)(11)(B)(iii)
1.401(k)-4 

(ii) Each employee may terminate an election to defer compensation any time during the year.
401(k)(11)(B)(iii)
401(k)-4(d)(2)(iii)

f. Notice Requirements 
The employer must notify each eligible employee prior to the 60-day election period described in IX.e.(i), above, that he or she can 
make an election to defer compensation under the SIMPLE 401(k) plan or modify a prior election during that period. The notification 
must indicate whether the employer will provide a 3-percent matching contribution or a 2-percent nonelective contribution. 
401(k)(11)(B)(iii)

Page 15                                                   CYCLE A Submission Period – 02/01/2016 – 01/31/2017
1.401(k)-4(d)(3)

X. Safe Harbor Coda Provisions

Sections 401(k)(12) and 401(m)(11) were added by the Small Business Job Protection Act of 1996 to provide, for plan years beginning 
after 12/31/98, a design-based or “safe harbor” method of satisfying the ADP and ACP tests. This is an alternative way of satisfying the 
ADP and ACP tests. If the plan, by its terms, does not satisfy the safe harbor method, it must satisfy the regular nondiscrimination test 
as described in this Explanation #12 (and Explanation #11 for the ACP test). A safe harbor CODA cannot “default” into ADP testing; the 
plan must specify whether it is or is not subject to ADP (and ACP) testing and must follow its terms. For example, plan language stating 
that the plan is a safe harbor plan only if the employer decides to hand out a safe harbor notice to employees, otherwise the plan will 
perform the ADP test, is not permitted. Rules that apply to both the ACP test safe harbor and the ADP test safe harbor are set forth in 
this Explanation. Explanation #11 summarizes, for the most part, rules that are only applicable to the ACP test safe harbor, or the rules 
that differ from those that apply to the ADP test safe harbor. Thus, Explanation #12 should always be referred to in addition to Explana-
tion #11 with respect to the ACP test safe harbor rules. The ADP test safe harbor requires that a plan meet certain contribution require-
ments (matching or nonelective) and a notice requirement. 

The ACP test safe harbor requires that a plan meet the contribution and notice requirements of the ADP test safe harbor and, in addi-
tion, satisfy a special limit on matching contributions. A plan providing for employee contributions, or matching contributions that fail to 
satisfy the ACP test safe harbor, must satisfy the regular ACP test under section 401(m)(2). 

ADP test safe harbor contributions are QNECs or QMACs and are subject to the same vesting and distributions requirements. (See VI.) 
Thus, for example, ADP test safe harbor contributions may not be distributed on account of hardship. In addition, such contributions 
must satisfy the ADP test safe harbor without regard to permitted disparity under section 401(I).

A plan that uses the safe harbor method to satisfy the ADP and ACP tests for a plan year is treated as using the current year testing 
method for that year and is subject to the rules contained in Regs. section 1.401(k)-3.

Explanation #11 describes the ACP test safe harbor. In some cases it will be unnecessary to complete all of Explanation #11 and the 
accompanying worksheet if the ADP test safe harbor is met. See Explanation #11 to determine whether it must be completed. Regs. 
sections 1.401(k)-3 and 1.401(m)-3 describe the ADP and ACP test safe harbor in greater detail.

Generally, a plan that is intended to satisfy the 401(k) safe harbor requirements for a plan year must, prior to the beginning of the plan 
year, contain language to that effect and must specify the 401(k) safe harbor method that will be used.  However, under Regs. section 
1.401(k)-3(f), a plan that provides that it will satisfy the current year ADP (and, if applicable, ACP) testing method for a plan year may be 
amended to specify that the 401(k) safe harbor nonelective contribution method will be used for the plan year, provided special notices 
are given to employees. Also, a safe harbor plan may prospectively reduce or suspend safe harbor contributions during a plan year if 
either (1) the employer is operating at an economic loss as described in section 412(c)(2)(A) or (2) the required notice (see h below) 
states that the plan may be amended during the plan year to reduce or suspend safe harbor contributions and that the reduction or sus-
pension will be effective no earlier than 30 days after participants are given a notice of the reduction or suspension. In such case, the 
plan must also be amended to provide that the plan will be satisfied using the current year ADP (and, if applicable ACP) testing meth-
od for the plan year.  (See Regs. section 1.401(k)-3(g).) Under section 416(g)(4)(H), for plan years beginning after 2001, a plan that 
consists solely of a safe harbor CODA and matching contributions that satisfy the ACP test safe harbor is not subject to the top-heavy 
requirements of section 416 provided contributions under the plan go to all employees eligible to make elective contributions

a. ADP Test Safe Harbor Matching or Nonelective Contributions There are five, alternative, methods a plan can use to satisfy the ADP 
test safe harbor, listed as (i) through (v) below. 

(i) Safe Harbor Basic Matching Formula The plan must provide for a plan year that a safe harbor matching contribution (a QMAC) is 
required to be made to the plan on behalf of each eligible employee who is a non-highly compensated employee (NHCE) equal to: (1) 
100% of the amount of the employee’s elective contributions that do not exceed 3% of the employee’s compensation for the plan year, 
plus (2) 50% of the amount of the employee’s elective contributions that exceed 3% of the employee’s compensation but that do not 
exceed 5% of the employee’s compensation. 

(ii) Safe Harbor Enhanced Matching Formula The plan must provide that an enhanced matching contribution is required to be made to 
the plan on behalf of each eligible NHCE under a formula that, at any rate of elective contributions, provides an aggregate amount of 
matching contributions at least equal to the aggregate amount of matching contributions that would have been provided under the basic 
matching formula. In addition, under an enhanced matching formula, the rate of matching contributions may not increase as an employ-
ee’s rate of elective contributions increases.

Neither (i) nor (ii) above is satisfied if, at any rate of elective contributions, the rate of matching contributions that would apply with 
respect to any highly compensated employee (HCE) who is an eligible employee is greater than the rate of matching contributions that 
would apply with respect to any NHCE who is an eligible employee and who has the same rate of elective contributions. 

A plan may match elective contributions on a payroll-by-payroll basis instead of an annual basis, if the plan so provides, for purposes of 
satisfying the ADP test safe harbor matching contribution requirements, as long as the plan provides that matching contributions with re-
spect to elective contributions made during a plan-year quarter are contributed to the plan no later than the last day of the immediately 

Page 16                                                                   CYCLE A Submission Period – 02/01/2016 – 01/31/2017
following plan-year quarter. The same rule applies for purposes of employee contributions that are matched. Explanation #11 describes 
additional rules that apply to the ACP test.

A plan meets the ADP test safe harbor with respect to matching contributions if the plan provides matching contributions on both elec-
tive contributions and employee contributions if, under the terms of the plan, either (1) the matching contributions provided on an em-
ployee’s elective contributions are not affected by the amount of the employee’s employee contributions or (2) matching contributions 
are made with respect to the sum of an employee’s elective and employee contributions under the same terms as matching contribu-
tions are made with respect to elective contributions.

(iii) Safe Harbor Nonelective Contribution 
The plan must provide for a plan year that a safe harbor nonelective contribution (a QNEC) is required to be made to the plan on behalf 
of each NHCE who is an eligible employee equal to at least 3% of the employee’s compensation. (Note that safe harbor nonelective 
contributions (and safe harbor matching contributions) may be counted under section 416 of the Code towards the minimum contribu-
tion requirement for top-heavy plans.)

(iv) Amendment From ADP Testing to Safe Harbor Nonelective Contribution 
A plan that provides that it will satisfy the current year ADP (and, if applicable, ACP) testing method for a plan year may be amended not 
later than 30 days before the last day of the plan year to specify that the safe harbor nonelective contribution method will be used for 
the plan year (including that the safe harbor nonelective contribution will be made), provided that the plan otherwise satisfies the ADP 

(v) Amendment From Safe Harbor Formula to ADP Testing
A safe harbor plan may prospectively reduce or suspend safe harbor contributions during a plan year and instead use the current year 
ADP (and, if applicable, ACP) testing method for the plan year provided that the reduction or elimination of contributions is effective no 
earlier than the later of (1) 30 days after eligible employees are given the supplemental notice (described under Line h below) and (2) 
the date the amendment is adopted. Eligible employees must be given a reasonable opportunity (including a reasonable period) prior 
to the reduction or elimination of safe harbor contributions to change their cash or deferred elections and, if applicable, their employee 
contribution elections. The plan must be amended to provide that the ADP test and, if applicable, the ACP test will be performed and 
satisfied for the entire plan year using the current year testing method, and all other safe harbor requirements must be satisfied through 
the effective date of the amendment. In addition, the plan must provide for and satisfy the supplemental notice requirement described 
under Line h (iii). Under Regs. section 1.401(k)-3(g), a safe harbor plan can reduce or suspend safe harbor contributions only under 
certain conditions.
401(k)(12)
1.401(k)-3

b. The safe harbor matching contribution requirement under Line a above is not satisfied if elective contributions by NHCEs are restrict-
ed, except for the following: 

(i) restrictions on the frequency and duration of election periods in which eligible employees may make or change cash or deferred elec-
tions under a plan are allowed, provided that after receipt of the required notice (see below), an employee has a reasonable opportunity 
(including a reasonable period) to make or change a cash or deferred election for the plan year. A 30-day period is deemed to be a 
reasonable period. 

(ii) restrictions on the amount of elective contributions are allowed, provided that each NHCE who is an eligible employee is permitted to 
make elective contributions in an amount that is at least sufficient to receive the maximum amount of matching contributions available 
under the plan for the plan year, and the employee is permitted to elect any lesser amount of elective contributions. The restrictions un-
der section 402(g) or 415 of the Code also apply and may restrict the amount of elective contributions allowed. Further, an employee’s 
ability to make elective contributions may be suspended for 6 months due to a hardship distribution as provided in the regulations under 
section 401(k) of the Code.

(iii) restrictions on the types of compensation that may be deferred are allowed, provided that each NHCE who is an eligible employee 
is permitted to make elective contributions under a reasonable definition of compensation under section 1.414(s)-I(d)(2) of the Income 
Tax Regulations. Thus, the definition for purposes of restricting the types of compensation that may be deferred is not required to satisfy 
the nondiscrimination requirement of section 1.414(s)-I(d)(3). For example, an employer could provide that deferrals may only be made 
out of basic compensation, not including tips. Note that this definition is not the same as the required definition of compensation for 
purposes of the safe harbor matching and nonelective contribution formulas

(iv) A plan does not fail to satisfy the ADP test safe harbor contribution requirement under section 401(k) (or the ACP test safe harbor 
requirements under section 401(m)) merely because employees are required under the plan terms to make cash or deferred or employ-
ee contribution elections in whole percentages of compensation or whole dollar amounts.
1.401(k)-3(c)(6)

c. Safe harbor matching and nonelective contributions must be immediately nonforfeitable regardless of the age and service of the 
employee or whether the employee is employed on a specific date.
401(k)(12)(E)

d. Safe harbor matching and nonelective contributions (QMACs and QNECs), and earnings thereon, are subject to the same distri-

Page 17                                                              CYCLE A Submission Period – 02/01/2016 – 01/31/2017
bution restrictions as elective contributions, except that safe harbor matching and nonelective contributions cannot be distributed on 
account of hardship. 
401(k)(12)(E) 
1.401(k)-6

e. To satisfy the ADP test safe harbor and the ACP test safe harbor, the plan year must generally be 12 months long, or in the case 
of the first plan year of a newly established plan (other than a successor plan) the plan year is at least 3 months long (or, any shorter 
period in the case of a newly established employer that establishes the plan as soon as administratively feasible after the employ-
er comes into existence). Also, safe harbor CODA provisions may be added to an existing profit-sharing, stock bonus, or pre-ERISA 
money purchase pension plan for the first time during a plan year provided the plan is not a successor plan and the CODA is made 
effective no later than 3 months prior to the end of the plan year. A similar rule applies for purposes of the ACP test safe harbor in the 
case of the addition of matching contributions for the first time to an existing defined contribution plan at the same time as the adoption 
of the CODA. The plan year may also be less than 12 months if the plan has a change in plan year or terminates, but only if the special 
requirements in Regs. section 1.401(k)-3(e)(3) and (4) are satisfied.
1.401(k)-3(e)

f. Compensation is the definition provided for under section 1.401(k)-6 of the regulations, which incorporates by reference the definition 
of compensation in section 414(s) of the Code and section 1.414(s)-l of the regulations. However, the rule in section 1.414(s)-I(d)(2)(iii) 
which permits a definition of compensation to exclude all compensation in excess of a certain amount is not applicable. Section 401(a)
(17) of the Code, imposing a dollar limit, is applicable. Solely for purposes of determining the compensation subject to a participant’s 
deferral election, the employer may use an alternative definition (see Line b.(iii)). 
1.401(k)-3(b)(2), (c)(6) and -6

g. An eligible employee is an employee eligible to make elective deferrals under the plan for any part of the plan year or who would be 
eligible to make elective deferrals but for a 6-month suspension due to a hardship distribution described in the plan or to statutory limita-
tions, such as section 402(g) and 415 of the Code. Thus, there can be no last-day or 1,000-hour requirement for receiving safe harbor 
contributions.
401(k)(12)(B) and (C) 
1.401(k)-3(b)(1) and (c)

h. Notice Requirement

(i) Content Requirement
The plan must provide that each eligible employee will be given a comprehensive notice of the employee’s rights and obligations under 
the plan, and such notice must be written in a manner calculated to be understood by the average eligible employee. The notice must 
accurately describe the safe harbor matching or nonelective contribution formula used under the plan, any other contributions under the 
plan including the potential for discretionary matching contributions and the conditions under which the contributions are made, the plan 
to which safe harbor contributions will be made if different than the plan containing the CODA, the type and amount of compensation 
that may be deferred, how to make elections, the periods for making elections, and withdrawal and vesting provisions. The notice can 
also include a statement that the plan’s safe harbor contributions may be reduced or suspended during the year and that, in such case, 
a supplemental notice will be provided to participants explaining the consequences. A safe harbor notice may cross reference the plan’s 
summary plan description for a portion of the information.
401(k)(12)(D)
1.401(k)-3(d)(2)

(ii) Timing Requirement
The notice must be provided within a reasonable period before the beginning of the plan year (or, in the year an employee becomes 
eligible, within a reasonable period before the employee becomes eligible). The timing requirement is deemed to be satisfied if, at 
least 30 days (and no more than 90 days) before the beginning of each plan year, the notice is given to each eligible employee for the 
plan year. If an employee becomes eligible after the 90th day before the beginning of the plan year and does not receive the notice for 
that reason, the notice must be provided no more than 90 days before the employee becomes eligible and no later than the date the 
employee becomes eligible.  If it is not practical for the notice to be provided by the date an employee becomes eligible, the notice will 
be treated as timely if it provided as soon as practical after that date and the employee is permitted to defer with respect to all compen-
sation earned from the date the employee becomes eligible.
401(k)(12)(D)
1.401(k)-3(d)(3) 

(iii) Additional requirements applicable to plans that change methods as described under Line a. iv and v above. 

   (1) If a plan changes from a current year ADP (and, if applicable ACP) testing method to use the 401(k) safe harbor nonelective con-
   tribution method, the plan will only satisfy applicable requirements if the notice given to employees before the beginning of the plan 
   year provides that the plan may be amended during the plan year to provide that the employer will make a safe harbor nonelective 
   contribution of at least 3 percent to the plan for the plan year, and if the plan is so amended, a supplemental notice will be given and 
   is given to all eligible employees no later than 30 days prior to the last day of the plan year, stating that the nonelective contribution 
   will be made for the plan year (and the amount thereof). 

Page 18                                                                      CYCLE A Submission Period – 02/01/2016 – 01/31/2017
   (2) If a plan is amended to reduce or suspend prospectively safe harbor contributions and instead use the current year ADP (and, if 
   applicable, ACP) testing method for the plan year, the plan must give a supplemental notice to all eligible employees, at least 30 days 
   prior to the effective date of the amendment, explaining the consequences of the amendment and informing them of the effective 
   date of the reduction or elimination of safe harbor contributions and that they have a reasonable opportunity (including a reasonable 
   period) to change their cash or deferred elections and, if applicable, their employee contribution elections. The plan must satisfy all 
   the safe harbor requirements through the date of the reduction or suspension.
   1.401(k)-3(f) and (g)

i. Another Plan
(ii) Safe harbor matching or nonelective contributions may be made to the plan that contains the CODA or to another defined contribu-
tion plan satisfying section 401(a) or 403(a). The requirements applicable to the safe harbor contributions also apply to the other plan 
and each employee eligible under the plan containing the CODA must be eligible under the same conditions under the other plan. 
401(k)(12)(F)
1.401(k)-3(h)(4)

(iii) The plan must have the same plan year as the plan containing the CODA. 
1.401(k)-3(h)(4)

(iv) Aggregation under section 410(b) is not required for safe harbor contributions to be made to another defined contribution plan, but 
the contributions may be used to satisfy the requirements of the safe harbor with respect to only one plan. 
1.401(k)-3(h)(4)

(iv) Other requirements of section 401(k) apply to a CODA that is treated as satisfying the ADP test safe harbor. Thus, benefits (other 
than matching contributions) must not be contingent on an election to defer, and elective contributions must satisfy allocation and timing 
rules applicable to section 401(k) plans. A plan that satisfies the ADP and ACP test safe harbor must satisfy all other qualification re-
quirements of the Code that are applicable to the plan, such as the nondiscriminatory avail-ability of benefits, rights, and features under 
section 401(a)(4), and the limitations of sections 401(a)(17), 401(a)(30), and 415.

Section 410(b) also applies to a CODA that is treated as satisfying the ADP test safe harbor. If, pursuant to section 410(b)(4)(B), the 
plan provides that section 410(b) applies separately to the portion of a plan that benefits only employees who satisfy age and service 
conditions under the plan that are lower than the greatest minimum age and service conditions permitted under section 410(a), the plan 
is treated as two separate plans for purposes of section 401(k), and the ADP test safe harbor need not be satisfied with respect to both 
plans in order for one of the plans to take advantage of the ADP test safe harbor. However, a plan that covers employees younger than 
age 21 or who have less than 1 year of service may not exclude such employees from receiving safe harbor contributions.  For other 
requirements relating to CODAs, the entire Explanation #12 should be reviewed, and if section 401(m) applies, Explanation #11.
1.401(k)-3(h)

j. Under § 1.401(k)-3(e)(1) of the Treasury Regulations, a § 401(k) safe harbor plan must be adopted before the beginning of the plan 
year and be maintained throughout a full 12-month plan year, except as otherwise provided in § 1.401(k)-3(g) (relating to the reduction 
or suspension of safe harbor contributions) or in guidance of general applicability published in the Internal Revenue Bulletin.  Similar 
rules are contained at § 1.401(m)-3(f)(1)  for safe harbor plans containing  § 401(m) matching contributions  Therefore, in general, a 
plan containing safe harbor provisions cannot be amended mid-year to change plan terms.

Notwithstanding this prohibition, a plan will not fail to satisfy the requirements to be a § 401(k) or (m) safe harbor plan merely because 
the plan sponsor adopts a mid-year amendment necessary to conform plan terms to be consistent with the decision in U.S. v. Windsor, 
570 U.S 12 (2013) and the guidance in Rev. Rul. 2013-17 and Notice 2014-19.  Plan terms otherwise in conflict with the decision must 
be removed, even if the plan is a safe harbor plan, which otherwise would be precluded from making mid-year changes.  For additional 
topical coverage, see Explanation #3.
Notice 2014-19, Q&A-8, Notice 2014-37

XI. Qualified Automatic Contribution Arrangements (QACAs)

Qualified automatic contribution arrangements (QACAs) are described in sections 401(k)(13) and 401(m)(12) of the Code, which were 
added by section 902 of PPA ’06, effective for plan years beginning on or after January 1, 2008. A 401(k) plan that meets the require-
ments of section 401(k)(13) is deemed to satisfy the ADP test and a plan that meets the requirements of 401(k)(13) and 401(m)(12) is 
deemed to satisfy the ACP test.  Under section 416(g)(4)(H), a QACA also is exempt from the top-heavy rules.

Except for the automatic enrollment features, the lower matching contribution requirement and the vesting applicable to the mandatory 
employer matching or nonelective contributions, the same rules that apply to Safe Harbor CODAs also apply to QACAs.  Thus, Part X 
should serve as a reference for this Part XI.

Final regulations for QACAs were published on February 24, 2009, and Rev. Rul. 2009-30, 2009-39 I.R.B. 391, provides guidance on 
the timing of QACA automatic increases.

a. A QACA must cover all eligible employees other than those with affirmative elections in effect to have a certain amount (or no 
amount) contributed to the plan as elective contributions.  The auto-enrollment feature can be applied to all employees eligible to make 

Page 19                                                            CYCLE A Submission Period – 02/01/2016 – 01/31/2017
deferrals but it cannot be limited to just certain groups of employees, such as new hires.  All employees subject to auto-enrollment must 
be given a reasonable opportunity to affirmatively elect a different amount of elective contributions or to have no amount contributed.
401(k)(13)
1.401(k)-3(j)(1)

b. The auto-enrollment feature in a QACA must satisfy a minimum and maximum requirement for the percentage of compensation 
(“default percentage”) that, in the absence of an affirmative election, is automatically deducted from employees’ wages and contributed 
to the plan as elective contributions.  The default percentage can not exceed 10 percent of compensation.  The minimum default per-
centage for the initial period (the date an employee is first covered by the QACA through the end of the following plan year) is 3 percent. 
The minimum for the plan year following the end of the initial period is 4 percent, 5 percent for the next plan year and, for all following 
plan years, the minimum is 6 percent of compensation. A plan can avoid these automatic increases in the default percentage, often 
referred to as an “escalator,” by having just one default percentage of between 6 and 10 percent of compensation.  
401(k)(13)
1.401(k)-3(j)(2)

c. The default percentage under a QACA must also be “uniform.”  Generally, this means that the default percentage must be the same 
for every employee with the same number of years or portions of years since the beginning of the employee’s initial period. Also, the 
percentage can vary to accommodate certain statutory restrictions. 
401(k)(13)
1.401(k)-3(j)(2)

d.  Under a QACA, an employer is required to make either a matching contribution described in (i) or (ii) below or a nonelective contri-
bution described in (iii) below.

(i) The QACA basic matching contribution is a contribution made to each nonhighly compensated employee equal to 100 percent of 
the employee’s elective contributions that do not exceed 1 percent of the employee’s compensation plus 50 percent of the employ-
ee’s elective contributions that exceed 1 percent but not 6 percent of the employee’s compensation.

(ii) The QACA enhanced matching contribution is at least as generous as in (i) and meets all the requirements in X.a.(ii).

(iii) The QACA nonelective contribution is an employer contribution made to each nonhighly compensated employee who is eligible 
under the plan in an amount equal to at least 3 percent of the employee’s compensation, whether or not the employee made any 
elective contributions.
401(k)(13)
1.401(k)-3(k)

e. The required employer contributions under the QACA, either matching or nonelective contributions, must be nonforfeitable after an 
employee has completed no more than 2 years of service.
401(k)(13)
1.401(k)-3(k)(3)

f.  The required employer contributions under the QACA must be subject to the same withdrawal restrictions as QNECs and QMACs.  
See X.d.
401(k)(13)
1.401(k)-3(k)(3)

g. The plan year of a QACA must generally be 12 months long except, in certain cases, for the initial and final year.  See X.e.
1.401(k)-3(e)

h. The compensation used for determining the required employer contributions under the QACA, either matching or nonelective contri-
butions, must be “safe harbor compensation” as defined under Regs section 1.401(k)-3(b)(2), and the same definition of compensation 
must be used for plan years beginning on or after January 1, 2010, for purposes of determining default contributions. See X.f.
1.401(k)-3(b), (c), (j)(1), (k)(2)

i.  The notice requirements for a QACA are generally the same as for a safe harbor CODA (see X.h.), except the QACA notice must 
explain the auto-enrollment feature, the employee’s right to elect a different amount (or no amount) and how default contributions will 
be invested in the absence of an investment directive from the employee.  In addition, the notice must be provided sufficiently early so 
that the employee has a reasonable period of time after receipt to make his or her own election and, if the plan so provides, to make 
investment choices. Default contributions must commence with the pay date for the second pay period that begins after the notice is 
provided or, if earlier, the first pay date that occurs 30 or more days after the notice is provided, assuming the employee has no affirma-
tive election in effect.
401(k)(13)(E)
1.401(k)-3(d), (k)(4)

Page 20                                                        CYCLE A Submission Period – 02/01/2016 – 01/31/2017

XII. Eligible Automatic Contribution Arrangements (EACAs)

Eligible automatic contribution arrangements (EACAs) are defined in Code section 414(w), which was added to the Code by section 
902(d)(1) of PPA '06 and is effective for plan years beginning on or after January 1, 2008. 

An EACA is an arrangement under which: (1) a participant may elect to have the employer make payments as contributions under the 
plan on behalf of the participant, or to the participant directly in cash; (2) the participant is treated as having elected to have the employ-
er make such contributions in an amount equal to a uniform percentage of compensation provided under the plan until the participant 
specifically elects not to have such contributions made (or specifically elects to have such contributions made at a different percentage); 
and (3) participants are provided a notice that satisfies the requirements of section 414(w)(4).

An EACA may permit covered employees to request a withdrawal of default contributions plus attributable earnings (a “permissible with-
drawal”) within 90 days after first being subject to the EACA.  Such a distribution is an exception to the normal withdrawal restrictions 
applicable to elective contributions and is not subject to the 10 percent additional tax under section 72(t).  A permissible withdrawal is 
not counted in the ADP test nor towards the employee’s section 402(g) limit. Also, the 2½ month deadline under section 4979 to distrib-
ute excess contributions and excess aggregate contributions without incurring a 10 percent tax is extended to 6 months, but only if all 
employees eligible to make elective contributions are covered under the EACA. Matching contributions made on permissible withdraw-
als must be forfeited.

Similar to safe harbor CODAs and QACAs, an EACA generally may not be started mid-year. Like these other two arrangements, an 
EACA requires that a notice describing the plan’s features be provided to covered employees before the beginning of each plan year. 
However, unlike safe harbor CODAs and QACAs, an EACA may apply EACA provisions to only some of the employees eligible to make 
deferrals under the plan.

Final regulations under section 414(W) were published on February 24, 2009, and a sample amendment to add an EACA to an existing 
401(k) plan was issued on September 5, 2009, in Notice 2009-65, which is in 2009-39 I.R.B.

a. The plan document must specify the employees who are covered under the EACA and must state whether an employee who makes 
an affirmative election remains covered under the EACA. The employees who must be subject to the automatic enrollment provisions 
under an EACA are only those employees who are specified in the plan as being covered employees under the EACA. Automatic 
enrollment under an EACA need not apply to all employees eligible to make elective contributions. All covered employees must receive 
the EACA annual notice, and the 6-month deadline under section 4979 is only available if all eligible employees are covered.
4979(f)
1.414(w)-1(e)(3)

b. The default elective contribution under an EACA must be a uniform percentage of compensation. However, the percentage can vary 
to accommodate certain statutory limits or according to the number of years or portions of years since the employee was first covered 
by the EACA. All automatic contribution arrangements that are intended to be EACAs within a plan (or within the disaggregated plan 
under regs section 1.410(b)-7, in the case of a plan subject to section 410(b)) are aggregated. Thus, for example, if a single plan within 
the meaning of section 414(l) covering employees in two separate divisions has two different automatic contribution arrangements that 
are intended to be EACAs, the two automatic contribution arrangements can constitute EACAs only if the default elective contributions 
under the arrangements are the same percentage of compensation.
414(w)(3)(B)
1.414(w)-1(b)(2)

c.  Each covered employee must be given a written notice of the employee's rights and obligations under the arrangement within a 
reasonable period before each plan year. Under section 414(w)(4), the notice regarding an employee's rights and obligations under the 
arrangement need only be provided to those employees who are covered employees under the EACA as set forth in the plan. Thus, if a 
plan provides that an employee who makes an affirmative election is no longer a covered employee under the EACA, then the employ-
ee is not required to receive the notice after he or she makes an affirmative election. The notice must accurately describe the default 
percentage under the plan, the employee’s ability to elect a different amount or no amount, how contributions will be invested in the 
absence of an investment direction from the employee, and, if applicable, the employee’s right to make a permissible withdrawal and 
the procedures for making such a withdrawal.  The timing requirement is deemed satisfied if the notice is provided at the time specified 
in regs section 1.401(k)-3(d)(3) for safe harbor CODAs. See X.h.  However, the notice must afford the employee a reasonable period of 
time after receipt of the notice to make his or her own election regarding elective contributions and to choose investments.
414(w)(4)
1.414(w)-1(b)(3)

d. A covered employee’s election to withdraw default elective contributions must be made no later than 90 days after the date of the first 
default elective contributions under the EACA.  A plan may specify an earlier deadline, but not earlier than 30 days. The effective date of 
the election cannot be later than the pay date for the second pay period beginning after the election or, if earlier, the first pay date that 
occurs at least 30 days after the election.
414(w)(2)(B)
1.414(w)-1(c)(2)

Page 21                                                           CYCLE A Submission Period – 02/01/2016 – 01/31/2017

e. The amount of the permissible withdrawal must be equal to the amount of default contributions made through the effective date of the 
employee’s withdrawal election adjusted for allocable gains and losses to the date of distribution. If default elective contributions are not 
separately accounted for under the plan, allocable gains and losses are determined under rules similar to those provided in regs section 
1.401(k)-2(b)(2)(iv) for the distribution of excess contributions.
414(w)(2)
1.414(w)-1(c)(3)

f. The plan may not charge a higher fee for a permissible withdrawal than would apply to any other cash distribution.
1.414(w)-1(c)(3)(ii)

                                                                               CYCLE A Submission Period – 02/01/2016 – 01/31/2017
                                                   Employee Benefit Plan 

                                Section 401(k) Requirements 
                                (Worksheet Number 12 – Determination of Qualification)
Instructions – All items must be completed unless the contrary is specifically provided. A "Yes" answer indicates a favorable conclusion is 
warranted while a "No" answer indicates a problem exists. Please use the space on the worksheet to explain any "No" answer. Numbers in 
brackets refer to EDS paragraph numbers. See Explanation Number 12 for guidance in completing this form.
The technical principles in this worksheet may be changed by future regulations or guidelines.
Name of plan

I. Applicability                                                                                    Plan Reference        Yes No                                                           N/A
a. Does the plan have a Cash or Deferred Arrangement (CODA)? [1201, 1202] (If 
“No,” skip this worksheet; if “Yes,” go on to b.)
b. Is this plan a profit-sharing, stock bonus, pre-ERISA money purchase or a rural 
cooperative plan? [1201, 1202] (If “No,” see explanations; if “Yes,” go on to Part II.)
II. Contributions                                                                                   Plan Reference        Yes No                                                           N/A
a. Does the plan provide each participant with an option to elect to have a contribution 
made to the plan on his/her behalf instead of receiving cash and is such election 
made before the time at which the employee may receive the amount? [1203]
b. Does the plan separately account for elective contributions, both pre-tax and Roth? 
[1204]
c. Does the plan provide that elective contributions will not exceed the limit imposed by 
section 402(g) under all the plans of the employer? [1206]
III. Coverage and Participation                                                                     Plan Reference        Yes No                                                           N/A
a. Do the employees eligible to benefit under the CODA satisfy the applicable 
coverage provisions of section 410(b)? [1207]
b. Does the plan require no more than 1 year of service and an age no greater than 21 
to participate in the plan? [1208]
IV. Vesting                                                                                         Plan Reference        Yes No                                                           N/A
a. Are elective contributions nonforfeitable when made, regardless of a participant’s 
age or service? [1209]
V. Discrimination                                                                                   Plan Reference        Yes No                                                           N/A
a. Does the plan:
(i) Include the Actual Deferral Percentage (ADP) test set forth in section 401(k)(3) 
     and provide that it will meet the test? [1211, 1212, 1213]
(ii) Incorporate the test by reference, including whether it is using the prior or current 
     year testing method, and provide that it will meet the test? [1211, 1212, 1213] or
(iii) Contain SIMPLE provisions? (If the plan contains SIMPLE provisions, do not 
     complete V.b., VI., VII.d.-g. and VIII.)
(iv) Contain safe harbor CODA provisions? (If the plan contains safe harbor CODA
     provisions, do not complete V.b, VI and VII.d.-g. of this worksheet. See also 
     worksheet number 11) or
(v) Contain Qualified Automatic Contribution Arrangement (QACA) provisions? (If 
Thisthe plan containsformQACA provisions,is provideddo not complete V.b, VI andasVII.d.-g.anof this example only and should not be 
     worksheet.)
b. If the terms of the plan set forth the ADP test rather than incorporate it by reference, does the plan, for purposes of this test:completed or returned to the Internal Revenue Service.
(i) Take into account the actual deferral ratios of all eligible employees; [1215, 1216]
(ii) Take elective contributions (other than catch-up contributions) into account for a 
     plan year only if attributable to compensation that would be received by the 
     employee during the plan year or earned during the plan year and received within 
     2½ months after the end of the plan year; [1218]
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Page 2                                                                             CYCLE A Submission Period – 02/01/2016 – 01/31/2017
V. Discrimination – Continued                                                                        Plan Reference Yes                  No N/A
(iii) Take a contribution into account for a plan year only if it is allocated to the 
       participant’s account on a day within the plan year; [1220]
(iv) Treat contributions made under plans that are aggregated for purposes of section 
       401(a)(4) or 410(b) as made under a single plan; [1221]
(v) Aggregate all arrangements under which a Highly Compensated Employee 
       (HCE) is eligible to make elective contributions for purposes of the HCE’s actual 
       deferral ratio; and [1223]
(vi) Determine the ADPs of the HCEs and of all other eligible employees using the 
       relevant plan year? [1225]
c. Are elective contributions (including catch-up contributions, if applicable) available to 
eligible employees on a nondiscriminatory basis? [1229]
VI. Qualified Nonelective Contributions (QNECs) and Qualified Matching 
                                                                                                     Plan Reference Yes                  No N/A
Contributions (QMACs)
(Complete if the terms of the plan provide that QNECs or QMACs are to be treated as elective contributions for purposes of the ADP test.)
a. If the plan provides QNECs or QMACs, are these contributions:
(i) Immediately vested, without regard to a participant’s age and service; [1274]
(ii) Distributed only under the distribution rules (other than hardship) applicable for 
       elective contributions? [1274]
b. Are QNECs and QMACs treated as elective contributions only if the conditions 
described in section 1.401(k)-2(a)(6) of the regulations are satisfied? [1276]
VII. Distributions and Corrections                                                                   Plan Reference Yes                  No N/A
a. Does the plan allow distributions of elective contributions only if one of the following occurs: [1231, 1232, 1233, 1234]
(i) Death, disability or severance from employment;
(ii) Attainment of age 59½ (profit sharing, stock bonus, rural cooperative plans only);
(iii) Participant hardship (profit-sharing, stock bonus, rural cooperative plans only);
(iv) Excess contributions (see VII.e. and f.) or excess deferrals (see VII.c.);
(v) Termination of the plan without establishment or maintenance of another DC plan 
       (other than an ESOP, a SEP, a SIMPLE IRA plan, a section 403(b) plan or a 
       section 457 plan); that is, the plan does not allow distributions of contributions 
       merely by reason of completion of a stated period of plan participation or the 
       lapse of a fixed period of years; or
(vi) A qualified reservist distribution defined in section 72(t)(2)(G)(iii)?
b. If the plan is a profit-sharing, stock bonus, or rural cooperative plan which allows hardship distributions, are such distributions 
made only in accordance with objective standards, set forth in the plan, giving the criteria for determining whether:
(i) The participant has an immediate and heavy financial need, and [1235]
(ii) The distribution is needed to alleviate the hardship? [1237]
c. Does the plan provide a mechanism by which excess deferrals and allocable 
income or loss may be distributed to the participant? [1238]
d. If the plan is using the current-year testing method, does it provide that in the event 
it would otherwise fail the ADP test the employer will make Additional Qualified 
ThisNonelective Contributionsform(QNECs)is providedor additional Qualified MatchingasContributionsan example only and should not be 
(QMACs) in order to satisfy the test? (If “No,” check “N/A”)
       completed or returned to the Internal Revenue Service.
e. Does the plan provide a mechanism by which elective contributions by the highly 
compensated employees in excess of the amount allowed in the ADP test may be 
distributed or recharacterized or have an alternative method that ensures 
satisfaction of the ADP test?

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Page 3                                                                                CYCLE A Submission Period – 02/01/2016 – 01/31/2017
VII. Distributions and Corrections – Continued                                              Plan Reference            Yes No          N/A
f.  If the plan provides that excess contributions will be distributed:
(i) Is the amount of the excess contributions to be distributed to individual highly 
       compensated employees determined by using the “ratio leveling” method? [1239, 
       1240]
(ii) Are distributions of excess contributions determined using the “dollar leveling” 
       method? [1241]
(iii) If the answer to VII.c. is “Yes,” does the plan reduce excess contributions to be 
       distributed by excess deferrals previously distributed? [1247]
(iv) Does the plan properly determine income to be distributed? [1249]
(v) Will the distribution be made no later than 12 months following the end of the 
       plan year? [1251]
g. If the plan provides for recharacterization:
(i) Does the plan permit employee contributions in addition to those resulting from 
       recharacterization? [1253]
(ii) Is the amount to be recharacterized determined using the “ratio leveling” 
       method? [1239, 1240]
(iii) Are recharacterization of excess contributions determined using the “dollar 
       leveling” method? [1241]
(iv) If the answer to VII.c. is “Yes,” does the plan reduce excess contributions to be 
       recharacterized by excess deferrals previously distributed? [1247]
(v) Will recharacterization occur within 2½ months of the end of the plan year? [1251]
VIII. Definition of Highly Compensated Employee/Compensation                                Plan Reference            Yes No          N/A
a. Does the plan define a Highly Compensated Employee (HCE) in accordance with 
section 414(q)? [1257, 1258]
b. For this definition does the plan:
(i) Define determination year, look-back year, compensation, and if applicable, top 
       paid group; and
(ii) Apply the aggregation rules of section 414? [1261, 1262, 1263]
c. Does the plan define compensation and specify the period used to determine an 
employee’s compensation for purposes of the ADP test? [1271, 1272]
d. Does the plan limit cash or deferred elections to amounts that are compensation 
within the meaning of section 415(c)(3)? [1273]
IX. SIMPLE Plan Provisions                                                                  Plan Reference            Yes No          N/A
(Complete if the plan contains SIMPLE provisions)
a. Does the plan prohibit eligible employees from participating in another plan of the 
employer? [1278]
b. Is the plan year the calendar year? [1279]
c. Does the plan define compensation properly? [1280]
d. With respect to contributions under the plan:
This(i) Are electiveformcontributions limitedis providedto $10,000 as adjusted? [1281]as an example only and should not be 
(ii) Is the employer required to either match employee’s elective contributions completed or returned to the Internal Revenue Service.
       (limited to 3 percent of compensation) or contribute 2 percent of compensation to 
       all eligible employees? [1282]
(iii) Are no other contributions permitted under the plan? [1283]
(iv) Are all contributions under the plan nonforfeitable when made? [1284]

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Page 4                                                                        CYCLE A Submission Period – 02/01/2016 – 01/31/2017
IX. SIMPLE Plan Provisions – Continued                                                  Plan Reference            Yes No N/A
e. Are employees allowed to make, amend or terminate deferral elections at the proper 
times? [1285]
f. Is the employer required to give proper notice of the plan to employees? [1286]
X. Safe Harbor CODA Provisions                                                          Plan Reference            Yes No N/A
(Complete if the plan contains Safe Harbor CODA provisions)
a. Does the plan provide for one of the following:
(i) The safe harbor basic matching formula,
(ii) A safe harbor enhanced matching formula,
(iii) Safe harbor nonelective contributions,
(iv) An amendment that changes from the current year ADP (and, if applicable ACP) 
       testing method to a safe harbor nonelective contribution method for the plan 
       year, or 
(v) An amendment that changes from a safe harbor contribution method to the 
       current year ADP (and, if applicable, ACP) testing method during the plan year? 
       [1287, 1288, 1289, 1290, 1291]
b. If the plan contains a safe harbor matching contribution formula, does the plan 
contain only permissible restrictions on elective contributions by NHCEs, such that: 
(i)  restrictions on election periods must give the employee a reasonable 
       opportunity, including a reasonable period, to make or change a cash or 
       deferred election [1292] 
(ii) each non-highly compensated employee (NHCE) who is an eligible employee is 
       permitted to make elective contributions in an amount sufficient to receive the 
       maximum amount of matching contributions available under the plan for the plan 
       year or is allowed to elect a lesser amount of elective contributions [1293] 
(iii) a reasonable definition of compensation under section 1.414(s)-l(d)(2) is used in 
       limiting the types of compensation that may be deferred by NHCEs)? [1294]
c. Does the plan provide that safe harbor matching contributions or nonelective 
contributions are immediately nonforfeitable? [1295]
d. Does the plan contain the appropriate restrictions on distributions of safe harbor 
matching and nonelective contributions and earnings? [1296]
e. Is the plan year 12 months long, or a permissible shorter length if it is a newly 
established plan, or, if applicable, does the plan meet the special requirements 
applicable to a CODA that is added to an existing profit-sharing, stock bonus or pre-
ERISA money purchase pension plan for the first time during a plan year (and the 
similar rules for matching contributions added to a defined contribution plan for the 
first time, if applicable)? [1297]
f.  Does the plan use the correct definition of compensation? [1298]
g. Does the plan provide that safe harbor matching contributions must be made on 
behalf of all NHCEs who are eligible employees and who make elective 
contributions or that safe harbor nonelective contributions must be made on behalf 
of all NHCEs who are eligible employees? [1299]
h. Does the plan provide that proper notice is given (satisfying content and timing 
requirements), including the additional plan provisions applicable to plans that 
change their testing methods during the plan year as described in X.a.(iv) and (v) 
Thisabove? [1300,form1301]      is provided as an example only and should not be 
i. If safe harbor contributions will be made to another defined contribution plan:
       completed or returned to the Internal Revenue Service.
(i) Is the name of the other plan specified in this plan,
(ii) Does the other plan meet the same requirements in satisfying the safe harbor 
       contribution requirements, and
(iii) Does the plan have the same plan year?  [1302]

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Page 5                                                                        CYCLE A Submission Period – 02/01/2016 – 01/31/2017
X. Safe Harbor CODA Provisions – Continued                                              Plan Reference             Yes No N/A
(Complete if the plan contains Safe Harbor CODA provisions)
(iv) Does the plan comply with all other applicable requirements of section 401(k) 
       and other sections of the Internal Revenue Code? (Complete other applicable 
       portions of Worksheet Number 12 for the CODA requirements, and if section 401
       (m) applies, see Worksheet Number 11.) [1303]
j.  Are mid-year amendments limited to the extent necessary to remove plan provisions 
inconsistent with the decision in U.S. v. Windsor, 570 U.S 12 (2013) and the 
guidance in Rev. Rul. 2013-17 and Notice 2014-19? [1326]

XI. Qualified Automatic Contribution Arrangements (QACAs)                               Plan Reference             Yes No N/A
(Complete if the plan contains QACA Provision)
a. Does automatic enrollment apply to all employees eligible to make elective 
contributions who do not have an affirmative election in effect? [1304]
b. Does the plan provide for a rate of automatic contributions that satisfies section 
401(k)(13)? [1305]
c. Is the default percentage uniform for all employees, except as provided in the 
regulations? [1306]
d. Does the plan provide for one of the following:
(i) The QACA basic matching formula, [1307]
(ii) A QACA enhanced matching formula, [1308] or
(iii) The QACA nonelective contributions? [1309]
e. Are QACA required employer matching or nonelective contributions nonforfeitable 
after no more than 2 years of service? [1310]
f.  Does the plan contain the appropriate distribution restrictions on QACA required 
employer matching or nonelective contributions? [1311]
g. Does the plan provide that plan years are 12 months long? [1312]
h. Does the plan use the correct definition of compensation? [1313]
i. Does the plan satisfy the notice requirements, including timing and content? [1314]
XII. Eligible Automatic Contribution Arrangements (EACAs)                               Plan Reference             Yes No N/A
(Complete if the plan contains EACA provisions)
a. Does the plan identify covered employees under the EACA? [1320]
b. Is the default percentage uniform for all covered employees? [1321]
c. Does the plan provide that proper notice will be given to covered employees within a 
reasonable period before each plan year? [1322]
d. Does the plan require that elections for permissible withdrawals be made within 90 
days? [1323]
e. Does the plan specify the correct amount of a permissible withdrawal? [1324]
f.  Are the fees charged for a permissible withdrawal no more than for any other cash 
distribution? [1325]

This form is provided as an example only and should not be 

       completed or returned to the Internal Revenue Service.

Form 9002 (Rev. 4-2016) Catalog Number 10096A              publish.no.irs.gov         Department of the Treasury - Internal Revenue Service

                                                                      CYCLE A Submission Period – 02/01/2016 – 01/31/2017
                                      Employee Plan Deficiency Checksheet
                                      Attachment Number 12
                                      Section 401(k) Requirements
For IRS Use                           Please furnish the amendment(s) requested in the section(s) checked below.
     1201, 1202    A plan that is not a profit-sharing, stock bonus, pre-ERISA money purchase pension, or rural cooperative plan 
     I.b.          will fail to satisfy the requirements of section 401(a) of the Code if the plan includes a Cash or Deferred 
                   Arrangement (CODA). A cash or deferred arrangement is an arrangement under which an employee may elect, 
                   with respect to amounts not currently available to the employee and not designated or treated as after tax
                   employee contributions, to have the employer contribute such amounts to the trust or provide such amounts to 
                   the employee. Since your plan is not one described in this section, it may not include a cash or deferred 
                   arrangement and should be amended accordingly. IRC section 401(k)(1) and Regs. section 1.401(k)-1(a).
     1203          Section             of the plan should be amended to provide that an employee’s election to defer may be made 
     II.a.         only with respect to an amount that the employee could otherwise elect to receive in cash and that is not 
                   currently available to the employee, for example, an amount that the employee is not eligible to receive at the 
                   time of the election to defer. IRC section 401(k)(2)(A) and Regs. sections 1.401(k)-1(a)(3) and 1.401(k)-1(e)(2). 
     1204          Section             of the plan should be amended to provide for a separate accounting for the portion of each 
     II.b.         employee’s benefit under the plan that is attributable to elective contributions (and any other amounts treated as 
                   elective contributions). If applicable, each employee’s Roth elective contributions and properly attributable 
                   earnings must be kept in an account separate from all other accounts under the plan. Regs. section 1.401(k)-1
                   (e)(3) and (f)(2). 
     1206          Section             of the plan should be amended to provide that a participant’s elective contributions for a 
     II.c.         calendar year under the plan and all other plans, contracts and arrangements of the employer will not exceed 
                   the limit imposed by section 402(g) of the Code for the calendar year. IRC section 401(a)(30). 
     1207          It must be demonstrated that the employees eligible under the cash or deferred arrangement satisfy the 
     III.a.        coverage requirements of section 410(b). IRC section 401(k)(3)(A)(i) and Regs. section 1.401(k)-1(b)(1). 
     1208          Section             of the plan should be amended to allow elective contributions after no more than one year of 
     III.b.        service. The plan may impose a minimum age requirement not greater than 21. IRC section 401(k)(2)(D).
     1209          Section             of the plan should be amended to provide that each employee’s right to the amount 
     IV.a.         attributable to elective contributions is immediately nonforfeitable regardless of the participant’s age and service. 
                   IRC section 401(k)(2)(C) and Regs. section 1.401(k)-1(c). 
1211, 1212, 1213   Section             of the plan should be amended to provide that the plan will meet the nondiscrimination test 
     V.a.(i), (ii) set forth in section 401(k)(3)(A)(ii) of the Code that applies to elective contributions. Under this test, the Actual 
                   Deferral Percentage (ADP) for the group of eligible highly compensated employees for the current plan year 
                   may not exceed the greater of (a) 125 percent of the ADP for all other eligible employees for the prior plan year 
                   or (b) the lesser of twice the ADP for all other eligible employees for the prior plan year, or such ADP for all 
                   other eligible employees for the prior plan year plus 2 percent. If the plan is using the current year testing 
                   method, then “the current plan year” should be substituted for “the prior plan year” in the previous sentence. The 
                   ADP for a group of eligible employees is the average of the ratios (calculated separately for each employee) of 
                   the amount of elective contributions (and other contributions treated as elective contributions) made on behalf of 
                   each employee for the relevant plan year, divided by the employee’s compensation for that plan year. Elective 
                   contributions are any employer contributions to a plan that were subject to a cash or deferred election under a 
                   cash or deferred arrangement. For the purpose of this requirement, the plan may incorporate by reference the 
                   provisions of section 401(k)(3) of the Code and section 1.401(k)-2 of the regulations. IRC section 401(k), Regs. 
                   sections 1.401(k)-1(e)(7) and 1.401(k)-2(a)(1)(i). 
     1215, 1216    Section             of the plan should be amended to provide that the plan will take into account the actual 
     V.b.(i)       deferral ratios of all eligible employees for purposes of the Actual Deferral Percentage (ADP) test in section 401
                   (k). For this purpose, an eligible employee is any employee who is directly or indirectly eligible to make a cash 
                   or deferred election under the plan for all or a portion of a plan year and includes: an employee who would be a 
This form is provided as an example only and should not be plan participant but for the failure to make required contributions; an employee whose eligibility to make elective 
                   contributions has been suspended because of an election (other than certain one-time elections) not to 
                   participate, a distribution, or a loan; and, an employee who cannot defer because of the section 415 limits on 
     completed or returned to the Internal Revenue Service.annual additions. In the case of an eligible employee who makes no elective contributions the deferral ratio that 
                   is to be included in determining the ADP is zero. IRC section 401(k)(3)(B) and Regs. section 1.401(k)-6. If an 
                   election has been made to apply section 410(b)(4)(B), the plan may provide that eligible non-highly 
                   compensated employees who have not met the minimum age and service requirements under section 410(a)(1)
                   (A) are excluded from the ADP test. Section 401(k)(3)(F).

Form 9417 (Rev. 4-2016)    Catalog Number 14163U publish.no.irs.gov          Department of the Treasury - Internal Revenue Service

Page 2                                                                    CYCLE A Submission Period – 02/01/2016 – 01/31/2017
       1218         Section   of the plan should be amended to provide that an elective contribution will be taken into 
       V.b.(ii)     account under the actual deferral percentage test of section 401(k)(3)(A) of the Code for a plan year only if it 
                    relates to compensation that either would have been received by the employee in the plan year (but for the 
                    deferral election) or is attributable to services performed by the employee in the plan year and would have been 
                    received by the employee within 2-1/2 months after the close of the plan year (but for the deferral election). 
                    Regs. section 1.401(k)-2(a)(4).
       1220         Section   of the plan should be amended to provide that an elective contribution will be taken into 
     V.b.(iii)      account under the actual deferral percentage test of section 401(k)(3)(A) of the Code for a plan year only if it is 
                    allocated to the employee as of a date within that plan year. For this purpose, an elective contribution is 
                    considered allocated as of a date within a plan year if the allocation is not contingent on participation or 
                    performance of services after such date and the elective contribution is actually paid to the trust no later than 12 
                    months after the plan year to which the contribution relates. Regs. section 1.401(k)-2(a)(4).
       1221         Section   of the plan should be amended to provide that for purposes of determining whether a plan 
     V.b.(iv)       satisfies the actual deferral percentage test of section 401(k), all elective contributions that are made under two 
                    or more plans that are aggregated for purposes of section 401(a)(4) or 410(b) (other than section 410(b)(2)(A)
                    (ii)) are to be treated as made under a single plan and that if two or more plans are permissively aggregated for 
                    purposes of section 401(k), the aggregated plans must also satisfy sections 401(a)(4) and 410(b) as though 
                    they were a single plan. IRC section 401(k)(3) and Regs. section 1.401(k)-1(b)(4).
       1223         Section   of the plan should be amended to provide that in calculating the actual deferral percentage 
       V.b.(v)      for purposes of section 401(k), the actual deferral ratio of a highly compensated employee will be determined by 
                    treating all cash or deferred arrangements under which the highly compensated employee is eligible (other than 
                    those that may not be permissively aggregated) as a single arrangement. IRC section 401(k)(3) and Regs. 
                    section 1.401(k)-2(a)(3)(ii).
       1225         Section   of the plan should be amended to provide that the Actual Deferral Percentage (ADP) of 
     V.b.(vi)       Highly Compensated Employees (HCEs) and Non-Highly Compensated Employees (NHCEs) are determined 
                    for the relevant plan years. If the plan is using the prior year testing method, the ADP of HCEs is determined for 
                    the current plan year (the “testing year”) and the ADP of NHCEs is determined for the prior plan year. If, on the 
                    other hand, the plan is using the current year testing method, the ADPs of both HCEs and NHCEs are 
                    determined for the current year. IRC sections 401(k)(3)(A) and (B).
       1229         Section   of the plan should be amended so that the availability of elective contributions (including 
       V.c.         catch-up contributions under section 414(v) of the Code, if applicable) does not discriminate in favor of highly 
                    compensated employees. IRC section 401(a)(4) and 414(v) and Regs. sections 1.401(k)-1(a)(4)(iv) and 1.414
                    (v)-1(e).
       1274         Nonelective contributions and matching contributions may be treated as elective contributions for purposes of 
     VI.a.(i), (ii) the actual deferral percentage test of section 401(k) only if such contributions are nonforfeitable when made to 
                    the plan and subject to the same distribution restrictions (other than hardship) that apply to elective 
                    contributions. Nonelective contributions and matching contributions that may be treated as elective contributions 
                    must satisfy these requirements without regard to whether they are actually taken into account as 
                    elective contributions. Section     of the plan should be amended accordingly. Regs. section 1.401(k)-6.
       1276         Section   of the plan should be amended to provide that nonelective contributions and/or matching 
       VI.b.        contributions may be treated as elective contributions only if the conditions described in section 1.401(k)-2(a)(6) 
                    of the regulations are satisfied. Regs. section 1.401(k)-2(a)(6).
1231, 1232,         Section   of the plan should be amended to provide that amounts attributable to elective contributions, 
     1233, 1234     including pre-tax elective contributions rolled into a participant’s Roth elective contribution account in the same 
       VII.a.       plan through an in-plan Roth rollover, may not be distributed earlier than upon one of the following events: 1. 
                    The employee’s retirement, death, disability or severance from employment; 2. The termination of the plan 
                    without establishment or maintenance of another defined contribution plan (other than an ESOP, a SEP, a 
                    SIMPLE IRA plan, a section 403(b) plan or a section 457 plan); 3. In the case of a profit-sharing, stock bonus or 
                    rural cooperative plan, the employee’s attainment of age 59-1/2 or the employee’s hardship; or 4. in the case of 
                    a qualified reservist distribution described in section 72(t)(2)(G), the date the employee is ordered or called to 
                    active duty. Paragraph 2 above applies only if the distribution is in the form of a lump sum and earnings on 
This formelective contributionsis provided(except certain grandfatheredasamounts)anmayexamplenot be distributed on accountonlyof hardship. Inand should not be 
                    addition, distributions may be made to participants affected by certain natural disasters, as described in the 
       completed or returned to the Internal Revenue Service.particular disaster legislation. IRC sections 401(k)(2)(B), (7)(C) and (10), Regs. section 1.401(k)-1(d)(1) and 
                    Notice 2013-74, 2013-52 I.R.B. 819.
       1235         Section   of the plan should be amended to set forth nondiscriminatory and objective standards for 
     VII.b.(i)      determining whether an employee, for purposes of entitlement to a hardship distribution, has an immediate and 
                    heavy financial need. See section 1.401(k)-1(d)(3)(iii)(B) of the regulations regarding certain deemed immediate 
                    and heavy financial needs.

Form 9417 (Rev. 4-2016)      Catalog Number 14163U     publish.no.irs.gov Department of the Treasury - Internal Revenue Service

Page 3                                                               CYCLE A Submission Period – 02/01/2016 – 01/31/2017
       1237         Section  of the plan should be amended to provide that a hardship distribution may be made only if it 
     VII.b.(ii)     is necessary to satisfy an immediate and heavy financial need. For this purpose, a distribution is not necessary 
                    to the extent it exceeds the amount necessary (including taxes) to relieve the need or to the extent the need 
                    may be satisfied from other resources reasonably available to the employee. See section 1.401(k)-1(d)(3)(iv)(E) 
                    of the regulations regarding distributions that are deemed necessary to satisfy financial need.
       1238         Section  of the plan should be amended to provide that an employee’s excess deferrals arising under 
       VII.c.       this plan and any related employer’s plan will be distributed, along with allocable earnings and losses by the first 
                    April 15 following the year in which the excess arose. A plan may provide that an employee is deemed to notify 
                    the employer of excess deferrals in this situation. For 2007 only, allocable income or loss must include income 
                    or loss for the participant’s taxable year and income or loss for the period between the end of the taxable year 
                    and the date of distribution (the “gap period”). For taxable years beginning before January 1, 2006, income or 
                    loss allocable to the gap period could be disregarded in determining income or loss on excess deferrals for such 
                    years. For years after 2007, allocable income or loss is determined only through the end of the taxable year of 
                    the excess. The plan may use any reasonable method for calculating the income or loss, provided the method is 
                    used consistently and is the normal method used by the plan for allocating income or loss to participants’ 
                    accounts. IRC section 401(a)(30) and Regs. sections 1.401(a)-30(a) and 1.402(g)-1(e).
     1239, 1240     Section  of the plan should be amended to provide that the amount of excess contributions for a highly 
VII.f.(i), g.(ii)   compensated employee will be determined in the following manner. First, determine how much the Actual 
                    Deferral Ratio (ADR) of the highly compensated employee with the highest ADR would have to be reduced to 
                    satisfy the Actual Deferral Percentage (ADP) test or cause such ratio to equal the ADR of the highly 
                    compensated employee with the next highest ratio. Second, this process is repeated until the ADP test would be 
                    satisfied. The amount of excess contributions is equal to the sum of these hypothetical reductions multiplied, in 
                    each case, by the highly compensated employee's compensation. IRC section 401(k)(8)(B) and Regs. section 
                    1.401(k)-2(b)(2)(ii).
       1241         Section  of the plan should be amended to provide that the identity of the highly compensated 
VII.f.(ii), g.(iii) employees subject to distribution (or recharacterization) of excess contributions will be determined using the 
                    “dollar leveling method” starting with the highly compensated employee with the greatest dollar amount of 
                    elective and other contributions treated as elective contributions for the plan year until the amount of excess 
                    contributions has been accounted for. IRC section 401(k)(8)(C) and Regs. section 1.401(k)-2(b)(2)(iii).
       1247         Section  of the plan should be amended to provide that the amount of excess contributions to be 
VII.f.(iii), g.(iv) distributed or recharacterized shall be reduced by excess deferrals previously distributed for the taxable year 
                    ending in the same plan year and excess deferrals to be distributed for a taxable year will be reduced by excess 
                    contributions previously distributed or recharacterized for the plan year beginning in such taxable year. Regs. 
                    section 1.401(k)-2(b)(4).
       1249         Section  of the plan should be amended to provide that the distribution of excess contributions will 
     VII.f.(iv)     include the income or loss allocable thereto. The income or loss allocable to excess contributions includes 
                    income or loss for the plan year for which the excess contributions were made and, in certain years before 
                    2008, gap-period income or loss. For plan years beginning before 2006, income or loss allocable to the “gap 
                    period” (the period between the end of the plan year in which the ADP was exceeded and the date of the 
                    distribution of excess contributions) could be disregarded in determining income or loss on excess contributions 
                    for such years. For plan years beginning after 2005 and before 2008, allocable income or loss included 
                    allocable income or loss for the gap period. For plan years beginning on or after January 1, 2008, allocable 
                    income or loss does not include allocable income or loss for the gap period. See section 1.401(k)-2(b)(2)(iv) of 
                    the regulations for a description of the manner in which income or loss allocable to excess contributions is to be 
                    calculated. IRC section 401(k)(8)(A) and Regs. section 1.401(k)-2(b)(2)(iv).
       1251         Failure to correct excess contributions by 12 months following the end of the plan year for which they were 
     VII.f.(v)      made will cause the cash or deferred arrangement to fail to satisfy the requirements of section 401(k)(3) for the 
                    plan year for which the excess contributions were made and for all subsequent years they remain in the trust. 
                    Also, the employer will be liable for a 10 percent excise tax on the amount of excess contributions unless they 
                    are distributed within 2-1/2 months (6 months in the case of certain plans that include an eligible automatic 
                    contribution arrangement within the meaning of section 414(w)) after the close of the plan year for which they 
                    were made. Section        of the plan should be amended accordingly. IRC sections 401(k)(8)(A) and 4979
This formand Regs.issectionprovided1.401(k)-2(b)(5).as an example only and should not be 
       1253         Section  of the plan should be amended to provide that excess contributions will not be 
     VII.g.(i)completed or returned to the Internal Revenue Service.recharacterized with respect to a highly compensated employee to the extent that the recharacterized amounts, 
                    in combination with employee contributions actually made by the employee, exceed the maximum amount of 
                    employee contributions (determined prior to applying section 401(m)(2)(A) of the Code) that the employee is 
                    permitted to make under the plan in the absence of recharacterization. Regs. section 1.401(k)-2(b)(3)(iii)(B).

Form 9417 (Rev. 4-2016)     Catalog Number 14163U publish.no.irs.gov Department of the Treasury - Internal Revenue Service

Page 4                                                                      CYCLE A Submission Period – 02/01/2016 – 01/31/2017
     1257, 1258  Section  of the plan should be amended to define highly compensated employee as an employee who:
       VIII.a.   1. was a 5-percent owner, as defined in section 416(i)(1)(A)(ii), at any time during the determination year or the 
                 look-back year, or 2. had compensation from the employer for the look-back year in excess of $80,000 (as 
                 adjusted) and, if the employer so elects in the plan, was in the top-paid group for the look-back year. IRC 
                 section 414(q), Regs. section 1.414(q)-1T and Notice 97-45, 1997-2 C.B. 296. 
1261, 1262, 1263 For purposes of the definition of highly compensated employee, section              of the plan should be 
       VIII.b.   amended to provide that: 1. The determination year is the plan year for which the determination of who is highly 
                 compensated is being made. 2. The look-back year is the 12-month period immediately preceding the 
                 determination year, or if the employer so elects in the plan, the calendar year beginning with or within such 12-
                 month period. 3. Compensation is compensation within the meaning of section 415(c)(3). 4. Employers 
                 aggregated under section 414(b), (c), (m), or (o) are treated as a single employer. 5. If the employer has made a 
                 top-paid group election, the top paid group consists of the top 20 percent of employees ranked on the basis of 
                 compensation received during the look-back year. For purposes of determining the number of employees in the 
                 top-paid group, employees described in section 414(q)(5) and Q&A 9(b) of section 1.414(q)-1T of the 
                 regulations are excluded. IRC section 414(q), Regs. section 1.414(q)-1T and Notice 97-45, 1997-2 C.B. 296.
     1271, 1272  Section  of the plan should be amended to define compensation, for purposes of the actual deferral 
       VIII.c.   percentage test of section 401(k) and the determination of excess contributions, in a manner that satisfies 
                 section 414(s) and over a period specified in section 1.401(k)-6 of the regulations. A definition will satisfy section 
                 414(s) if it conforms to one of the definitions described in Regs. sections 1.414(s)-1(c)(2) and 1.414(s)-1(c)(3). 
                 Alternatively, submit a demonstration that the definition is nondiscriminatory. IRC sections 401(k)(9) and 414(s) 
                 and Regs. sections 1.401(k)-6 and 1.414(s)-1.
       1273      Section  of the plan should be amended to provide that cash or deferred elections can only be made 
       VIII.d.   with respect to amounts that are compensation within the meeting of section 415(c)(3). Regs. section 1.401(k)-1
                 (e)(8).
       1278      Section  of the plan should be amended to provide that no contributions can be made, or benefits 
       IX.a.     accrued for services during the year, on behalf of any eligible employee under any other plan, contract, pension, 
                 or trust described in section 219(g)(5)(A) or (B), maintained by the employer. IRC section 401(k)(11)(C).
       1279      Section  of the plan should be amended to provide that the plan year is the calendar year. IRC 
       IX.b.     sections 401(k)(11)(D) and 408(p)(6)(C).
       1280      Section  of the plan should be amended to provide that for purposes of applying the 401(k) SIMPLE 
       IX.c.     provisions, compensation has the meaning in section 408(p)(6)(A) as limited to the section 401(a)(17) amount. 
                 IRC sections 401(a)(17), 401(k)(11)(D) and 408(p)(6)(A).
       1281      Section  of the plan should be amended to provide that no employee may defer more than the 
       IX.d.(i)  applicable dollar amount under Code section 408(p)(2)(E) (plus catch-up contributions, if applicable) annually to 
                 the plan. IRC sections 401(k)(11)(B), 408(p)(2)(E) and 414(v).
       1282      Section  of the plan should be amended to provide that, each year, the employer will contribute either 
     IX.d.(ii)   a matching contribution (limited to 3 percent of the employee’s compensation) to each employee who made 
                 elective contributions or a 2 percent nonelective contribution to each employee who earned at least $5,000 (or a 
                 lesser amount) for the year. IRC section 401(k)(11)(B).
       1283      Section  of the plan should be amended to provide that no other contribution may be made to the plan. 
     IX.d.(iii)  IRC section 401(k)(11)(B).
       1284      Section  of the plan should be amended to provide that all benefits attributable to contributions made 
     IX.d.(iv)   under the plan are nonforfeitable at all times. IRC section 401(k)(11)(A)(iii).
       1285      Section  of the plan should be amended to provide that employees can make deferral elections during 
       IX.e.     the applicable 60-day periods described in section 401(k)(11)(B)(iii) and Regs. section 1.401(k)-4(d). Employees 
                 must be permitted to terminate an election any time during the year. IRC section 401(k)(11)(B)(iii) and Regs. 
                 section 1.401(k)-4(d).
       1286      Section  of the plan should be amended to provide that the employer will notify each eligible 
       IX.f.     employee, prior to the 60-day election period described in section 401(k)(11)(B)(iii) and Regs. section 1.401(k)-4
This form(d), of the employee’sis providedeligibility under the planasand the specificanemployerexamplecontributions that willonlybe made for theand should not be 
                 year. IRC section 401(k)(11)(B)(iii) and Regs. section 1.401(k)-4(d).
       completed1287 Section  oforthe planreturnedshould be amended to providetothatthea safe harborInternalmatching contributionRevenuewill be      Service.
       X.a.(i)   made to the plan on behalf of each eligible Non-Highly Compensated Employee (NHCE) equal to: 100 percent 
                 of the amount of the employee’s elective contributions that do not exceed 3 percent of the employee’s 
                 compensation for the plan year, plus 50 percent of the amount of the employee’s elective contributions that 
                 exceed 3 percent of the employee’s compensation but that do not exceed 5 percent of the employee’s 
                 compensation. IRC section 401(k)(12)(B)(i). 

Form 9417 (Rev. 4-2016)  Catalog Number 14163U      publish.no.irs.gov         Department of the Treasury - Internal Revenue Service

Page 5                                                                    CYCLE A Submission Period – 02/01/2016 – 01/31/2017
       1288     Section             of the plan should be amended to provide that an enhanced matching contribution will be 
       X.a.(ii) made to the plan under a formula that at any rate of elective contributions provides an aggregate amount of 
                matching contributions at least equal to the aggregate amount of matching contributions that would have been 
                provided under the basic matching formula, and the formula provides that the rate of matching contributions 
                does not increase as an employee’s rate of elective contributions increases. IRC section 401(k)(12)(B)(iii). 
       1289     Section             of the plan should be amended to provide that a safe harbor nonelective contribution will be 
     X.a.(iii)  made to the plan on behalf of each Non-Highly Compensated Employee (NHCE) who is an eligible employee in 
                an amount equal to at least 3 percent of the employee’s compensation. IRC section 401(k)(12)(C).
       1290     Section             of the plan should be amended to provide that a change from the current year Actual Deferral 
     X.a.(iv)   Percentage (ADP) (and, if applicable, Actual Contribution Percentage (ACP)) testing method to a safe harbor 
                nonelective contribution method will be made. Regs. section 1.401(k)-3(f).
       1291     Section             of the plan should be amended to provide that a change from a safe harbor matching 
       X.a.(v)  contribution method to the current year Actual Deferral Percentage (ADP) (and, if applicable, Actual Contribution 
                Percentage (ACP)) testing method will be made. Regs. section 1.401(k)-3(g).
       1292     Section             of the plan should be amended to contain only appropriate restrictions on elective 
       X.b.(i)  contributions by Non-Highly Compensated Employees (NHCEs) including that restrictions on election periods 
                must give the employee a reasonable opportunity, including a reasonable period, to make or change a cash or 
                deferred election. Regs. section 1.401(k)-3(c)(6).
       1293     Section             of the plan should be amended to provide that the restrictions on the amount of elective 
       X.b.(ii) contributions are permissible only if each Non-Highly Compensated Employee (NHCE) who is an eligible 
                employee is permitted to make elective contributions in an amount sufficient to receive the maximum amount of 
                matching contributions available under the plan for the plan year or is allowed to elect a lesser amount of 
                elective contributions. Regs. section 1.401(k)-3(c)(6).
       1294     Section             of the plan should be amended to contain a reasonable definition of compensation under 
     X.b.(iii)  section 1.414(s)-1(d)(2) in limiting the types of compensation that may be deferred for Non-Highly Compensated 
                Employees (NHCEs). Regs. section 1.401(k)-3(c)(6).
       1295     Section             of the plan should be amended to provide that safe harbor matching and nonelective 
       X.c.     contributions are nonforfeitable when made to the plan. IRC section 401(k)(12)(E).
       1296     Section             of the plan should be amended to provide that safe harbor matching and nonelective 
       X.d.     contributions, and earnings thereon, are subject to the same distribution restrictions as elective contributions, 
                except that safe harbor matching and nonelective contributions cannot be distributed on account of hardship. 
                IRC section 401(k)(12)(E).
       1297     Section             of the plan should be amended to provide that the plan year is 12 months long (unless it is 
       X.e.     the first plan year of a newly established plan). If a CODA is added to an existing plan, the plan should be 
                amended to provide that the CODA (and the addition of matching contributions, if applicable) is effective not 
                later than 3 months prior to the end of the plan year. Regs. section 1.401(k)-3(e).
       1298     Section             of the plan should be amended to define compensation in accordance with section 1.401(k)-6 
       X.f.     of the regulations, and to provide that compensation in excess of a certain amount may not be excluded in this 
                definition, except that the limit of section 401(a)(17) applies.
       1299     Section             of the plan should be amended to contain the proper definition of eligible employee for safe 
       X.g.     harbor matching contributions.
     1300, 1301 Section             of the plan should be amended to provide that the employer must distribute a notice to each 
       X.h.     eligible employee that comprehensively describes the types of safe harbor contributions made, the plan to which 
                they are made, the type and amount of compensation that may be deferred, how to make elections and the 
                period for making elections, and withdrawal and vesting provisions. If applicable, the plan should be amended to 
                provide for a supplemental notice to be given if a plan changes from a current year Actual Deferral Percentage 
                (ADP) (or Actual Contribution Percentage (ACP)) testing method to the safe harbor nonelective contribution 
                method, or if a plan reduces or suspends safe harbor contributions and changes to the current year ADP (and 
                ACP) testing method. Regs. section 1.401(k)-3(d), (f) and (g). 
This form is provided as an example only and should not be 
       1302     Section             of the plan should be amended to specify the name of the other plan to which safe harbor 
       completedX.i. contributions will beormade. Regs.returnedsection 1.401(k)-3(h)(4).to the Internal Revenue Service.
       1303     Section             of the plan should be amended to provide that the other requirements of section 401(k) (other 
       X.i.(v)  than the nondiscrimination test of section 401(k)(3)(A)(ii)) apply to a CODA that satisfies the Actual Deferral 
                Percentage (ADP) test safe harbor. A safe harbor CODA cannot “default” into ADP testing; the plan must 
                specify whether it is or is not subject to ADP (and ACP) testing and must follow its terms. For example, plan 
                language stating that the plan is a safe harbor plan only if the employer decides to hand out a safe harbor notice 
                to employees, otherwise the plan will perform the ADP test, is not permitted.
Form 9417 (Rev. 4-2016) Catalog Number 14163U          publish.no.irs.gov               Department of the Treasury - Internal Revenue Service

Page 6                                                           CYCLE A Submission Period – 02/01/2016 – 01/31/2017
       1304     Section           of the plan should be amended to provide that the QACA will cover all eligible employees 
       XI.a.    other than those with affirmative elections in effect to have a certain amount (or no amount) contributed to the 
                plan as elective contributions. The auto-enrollment feature can be applied to all employees eligible to make 
                deferrals but it cannot be limited to just certain groups of employees, such as new hires. All employees subject 
                to auto-enrollment must be given a reasonable opportunity to affirmatively elect a different amount of elective 
                contributions or to have no amount contributed. IRC section 401(k)(13) and Regs. section 1.401(k)-3(j)(1).
       1305     Section           of the plan should be amended to provide that the auto-enrollment feature in a QACA will 
       XI.b.    satisfy the statutory minimum and maximum requirement for the percentage of compensation (“default 
                percentage”) that, in the absence of an affirmative election, will be automatically deducted from employees’ 
                wages and contributed to the plan as elective contributions. The default percentage cannot exceed 10 percent 
                of compensation. The minimum default percentage for the initial period (the date an employee is first covered by 
                the QACA through the end of the following plan year) is 3 percent. The minimum for the plan year following the 
                end of the initial period is 4 percent, 5 percent for the next plan year and, for all following plan years, the 
                minimum is 6 percent of compensation. IRC section 401(k)(13) and Regs. section 1.401(k)-3(j)(2).
       1306     Section           of the plan should be amended to provide that the default percentage under the QACA is 
       XI.c.    “uniform.” Generally, this means that the default percentage must be the same for every employee with the 
                same number of years or portions of years since the beginning of the employee’s initial period. Also, the 
                percentage can vary to accommodate certain statutory restrictions. IRC section 401(k)(13) and Regs. section 
                1.401(k)-3(j)(2).
       1307     Section           of the plan should be amended to provide that a matching contribution will be made to each 
       XI.d.(i) non-highly compensated employee equal to 100 percent of the employee’s elective contributions that do not 
                exceed 1 percent of the employee’s compensation plus 50 percent of the employee’s elective contributions that 
                exceed 1 percent but not 6 percent of the employee’s compensation. IRC section 401(k)(13)(D) and Regs 
                section 1.401(k)-3(k).
       1308     Section           of the plan should be amended to provide that an enhanced matching contribution will be 
     XI.d.(ii)  made to the plan under a formula that at any rate of elective contributions provides an aggregate amount of 
                matching contributions at least equal to the aggregate amount of matching contributions that would have been 
                provided under the basic matching formula, and the formula provides that the rate of matching contributions 
                does not increase as an employee’s rate of elective contributions increases. IRC section 401(k)(13)(D) and 
                Regs section 1.401(k)-3(k).
       1309     Section           of the plan should be amended to provide that a nonelective contribution will be made to 
     XI.d.(iii) each non-highly compensated employee who is eligible under the plan in an amount equal to at least 3 percent 
                of the employee’s compensation, whether or not the employee made any elective contributions. IRC section 
                401(k)(13)(D) and Regs section 1.401(k)-3(k).
       1310     Section           of the plan should be amended to provide that the required employer contributions under the 
       XI.e.    QACA, either matching or nonelective contributions, must be nonforfeitable after an employee has completed no 
                more than 2 years of service. IRC section 401(k)(13)(D)(iii) and Regs. section 1.401(k)-3(k)(3).
       1311     Section           of the plan should be amended to provide that QACA required matching and nonelective 
       XI.f.    contributions, and earnings thereon, are subject to the same distribution restrictions as elective contributions, 
                except that QACA required matching and nonelective contributions cannot be distributed on account of 
                hardship. IRC section 401(k)(13)(D)(iii).
       1312     Section           of the plan should be amended to provide that the plan year is 12 months long (unless it is 
       XI.g.    the first plan year of a newly established plan). If a CODA is added to an existing plan, the plan should be 
                amended to provide that the CODA (and the addition of matching contributions, if applicable) is effective not 
                later than 3 months prior to the end of the plan year. Regs. section 1.401(k)-3(e).
       1313     Section           of the plan should be amended to provide that compensation used for determining the 
       XI.h.    required employer contributions under the QACA, either matching or nonelective contributions, is “safe harbor 
                compensation” as defined under Regs section 1.401(k)-3(b)(2), and the same definition of compensation will be 
                used for plan years beginning on or after January 1, 2010, for purposes of determining default contributions. 
                Regs. section 1.401(k)-3(b), (c), (j)(1), (k)(2).
This form is provided as an example only and should not be 

       completed or returned to the Internal Revenue Service.

Form 9417 (Rev. 4-2016) Catalog Number 14163U publish.no.irs.gov Department of the Treasury - Internal Revenue Service

Page 7                                                              CYCLE A Submission Period – 02/01/2016 – 01/31/2017
       1314   Under a QACA, the employer must distribute a notice to each eligible employee that comprehensively describes 
       XI.i.  the auto-enrollment feature, the employee’s right to elect a different amount (or no amount) and how default 
              contributions will be invested in the absence of an investment directive from the employee, the types of QACA 
              required employer contributions that will be made, the plan to which they will be made, the type and amount of 
              compensation that may be deferred, how to make elections and the period for making elections, and withdrawal 
              and vesting provisions. In addition, the notice must be provided sufficiently early so that the employee has a 
              reasonable period of time after receipt to make his or her own election and, if the plan so provides, to make 
              investment choices. Default contributions must commence with the pay date for the second pay period that 
              begins after the notice is provided or, if earlier, the first pay date that occurs 30 or more days after the notice is 
              provided, assuming the employee has no affirmative election in effect. If applicable, the plan should be 
              amended to provide for a supplemental notice to be given if a plan changes from a current year Actual Deferral 
              Percentage (ADP) (or Actual Contribution Percentage (ACP)) testing method to the QACA nonelective 
              contribution method, or if a plan reduces or suspends QACA contributions and changes to the current year ADP 
              (and ACP) testing method. Section   of the plan should be amended accordingly. IRC section 
              401(k)(13)(E) and Regs. section 1.401(k)-3(d), (f), (g) and (k)(4).
       1320   Section            of the plan should be amended to specify the employees who are covered under the EACA 
       XII.a. and the plan document must state whether an employee who makes an affirmative election remains covered 
              under the EACA. The employees who must be subject to the automatic enrollment provisions under an EACA 
              are only those employees who are specified in the plan as being covered employees under the EACA. Regs. 
              section 1.414(w)-1(e)(3).
       1321   The default elective contribution under an EACA must be a uniform percentage of compensation. However, the 
       XII.b. percentage can vary to accommodate certain statutory limits or according to the number of years or portions of 
              years since the employee was first covered by the EACA. All automatic contribution arrangements that are 
              intended to be EACAs within a plan (or within the disaggregated plan under Regs. section 1.410(b)-7, in the 
              case of a plan subject to section 410(b)) are aggregated. Section         of the plan should be amended 
              accordingly. IRC section 414(w)(3)(B) and Regs. section 1.414(w)-1(b)(2).
       1322   Each covered employee must be given a written notice of the employee's rights and obligations under the 
       XII.c. arrangement within a reasonable period before each plan year. The notice must accurately describe the default 
              percentage under the plan, the employee’s ability to elect a different amount or no amount, how contributions 
              will be invested in the absence of an investment direction from the employee, and, if applicable, the employee’s 
              right to make a permissible withdrawal and the procedures for making such a withdrawal. The timing 
              requirement is deemed satisfied if the notice is provided at the time specified in Regs. section 1.401(k)-3(d)(3). 
              However, the notice must afford the employee a reasonable period of time after receipt of the notice to make his 
              or her own election regarding elective contributions and to choose investments. Section     of the plan 
              should be amended accordingly. IRC section 414(w)(4) and Regs. section 1.414(w)-1(b)(3).
       1323   A covered employee’s election to withdraw default elective contributions must be made no later than 90 days 
       XII.d. after the date of the first default elective contributions under the EACA. A plan may specify an earlier deadline, 
              but not earlier than 30 days. The effective date of the election cannot be later than the pay date for the second 
              pay period beginning after the election or, if earlier, the first pay date that occurs at least 30 days after the 
              election. Section         of the plan should be amended accordingly. IRC section 414(w)(2)(B) and Regs. 
              section 1.414(w)-1(c)(2).
       1324   Section            of the plan should be amended to provide that the amount of the permissible withdrawal is 
       XII.e. equal to the amount of default contributions made through the effective date of the employee’s withdrawal 
              election adjusted for allocable gains and losses to the date of distribution. If default elective contributions are not 
              separately accounted for under the plan, allocable gains and losses are determined under rules similar to those 
              provided in Regs. section 1.401(k)-2(b)(2)(iv) for the distribution of excess contributions. IRC section 414(w)(2) 
              and Regs. section 1.414(w)-1(c)(3).
       1325   Section            of the plan should be amended to provide that the fee for a permissible withdrawal is no 
       XII.f. higher than would apply to any other cash distribution. Regs. section 1.414(w)-1(c)(3)(ii).
       1326   Please explain why amendments (other than those necessary to conform plan provisions to the decision in U.S.
       X.j.   v. Windsor, 570 U.S.12 (2013) and the guidance in Rev. Rul. 2013-17 and Notice 2014-19 were made to the 
              plan’s safe harbor feature during the plan year).
This form is provided as an example only and should not be 

       completed or returned to the Internal Revenue Service.

Form 9417 (Rev. 4-2016) Catalog Number 14163U    publish.no.irs.gov Department of the Treasury - Internal Revenue Service