Form 9416 

(Rev. November 2006) 

Department of the Treasury — Internal Revenue Service 

Employee Plan Deficiency Checksheet 

Attachment #11 — Section 401(m) Requirements 

Date 

For IRS Use Please furnish the amendment(s) requested in the section(s) checked below. 

1101, 1102, 

1103 

II.a.(i), (ii) 

Section of the plan should be amended to provide that the plan will meet the nondiscrimination 

test set forth in section 401(m)(2)(A) of the Code that applies to employee and matching contributions. Under 

this test, the actual contribution percentage (ACP) for the group of eligible highly compensated employees for the 

current plan year may not exceed the greater of (a) 125% of the ACP for all other eligible employees for the prior plan 

year or (b) the lesser of twice the ACP for all other eligible employees for the prior plan year, or such ACP for all other 

eligible employees for the prior plan year plus 2%. 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 ACP for a group of 

eligible employees is the average of the ratios (calculated separately for each employee) of the sum of matching and 

employee contributions and other contributions taken into account paid under the plan on behalf of each employee for 

the relevant plan year, divided by the employee’s compensation for that plan year. Employee contributions are any 

employee contributions made on behalf of an employee to an individual account to which attributable earnings and 

losses are allocated. Matching contributions are any employer contributions (including discretionary contributions) 

made to a plan on account of an employee contribution or elective contribution to a plan maintained by the employer 

and any forfeitures allocated on the basis of employee contributions, matching contributions, or elective contributions. 

For purposes of this requirement, the plan may incorporate by reference the provisions of section 401(m) of the Code 

and section 1.401(m)-2 of the regulations. IRC section 401(m) and Regs. section 1.401(m)-1(c)(2) and -2(a)(1)(i). 

1163, 1164, 

1165 

Il.b.(i) 

Section of the plan should be amended to provide that the plan will take into account the actual 

contribution ratios of all eligible employees for purposes of the actual contribution percentage (ACP) test in 

IRC section 401(m). For this purpose, an eligible employee is any employee who is directly or indirectly eligible to 

receive an allocation of matching contributions or to make employee contributions and includes: an employee who 

would be a plan participant but for the failure to make required contributions; an employee whose right to make 

employee contributions or receive matching contributions has been suspended because of an election (other than 

certain one-time elections) not to participate; and an employee who cannot make an employee contribution or receive a 

matching contribution because section 415(c)(1) prevents the employee from receiving additional annual additions. In 

the case of an eligible employee who makes no employee contributions and who receives no matching contributions, 

the contribution ratio that is to be included in determining the ACP is zero. IRC section 401(m)(3) and (5) and Regs. 

section 1.401(m)-5. 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 minimum age and service requirements under section 

410(a)(1)(A) are excluded from the ACP test. IRC section 401(m)(5)(C). 

1106, 1107 

II.b.(ii) 

Section of the plan should be amended to provide that, in calculating the actual contribution 

percentage (ACP) test of IRC section 401(m) for a plan year, contributions will be taken into account as 

follows: An employee contribution is to be taken into account if it is paid to the trust during the plan year or paid to an 

agent of the plan and transmitted to the trust within a reasonable period after the end of the plan year. An excess 

contribution to a cash or deferred arrangement that is recharacterized is to be taken into account in the plan year in 

which the contribution would have been received in cash by the employee had the employee not elected to defer the 

amounts. A matching contribution taken into account for a plan year only if it is (1) made on account of the employee’s 

elective or employee contributions for the plan year, (2) allocated to the employee’s account as of a date within that 

year, and (3) paid to the trust no later than the 12 months immediately following that year. Qualified matching 

contributions which are used to meet the requirements of section 401(k)(3)(A) are not to be taken into account for 

purposes of the ACP test of section 401(m). IRC section 401(m)(3) and Regs. section 1.401(m)-2(a)(4) and (5). 

1108 

II.b.(iii) 

Section of the plan should be amended to provide that for purposes of determining whether a 

plan satisfies the actual contribution percentage test of IRC section 401(m), all employee and matching 

contributions that are made under two or more plans that are aggregated for purposes of section 401(a)(4) and 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(m), the aggregated plans must also satisfy sections 401(a)(4) and 

410(b) as though they were a single plan. IRC section 401(m)(2)(B) and Regs. section 1.401(m)-1(b)(4). 

1109 

II.b.(iv) 

Section of the plan should be amended to provide that in calculating the actual contribution 

percentage for purposes of section 401(m), the actual contribution ratio of a highly compensated employee 

will be determined by treating all plans subject to section 401(m) under which the highly compensated employee is 

eligible (other then those that may not be permissively aggregated) as a single plan. IRC section 401(m)(2)(B) and 

Regs. section 1.401(m)-2(a)(3)(ii). 

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1115 

II.b.(v) 

Section of the plan should be amended to provide that the actual contribution percentages 

(ACPs) of 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 ACP of HCEs is 

determined for the current plan year (the “testing year”) and the ACP of NHCEs is determined for the prior plan year. 

If, on the other hand, the plan is using the current year testing method, the ACPs of both HCEs and NHCEs are 

determined for the current year. IRC section 401(m)(2)(A). 

1112 

II.c. 

Section 

matching contributions, if applicable) does not discriminate in favor of highly compensated employees. 

of the plan should be amended so that the availability of employee contributions (and 

IRC section 401(a)(4) and Regs. section 1.401(m)-1(a)(2). 

1136, 1137, 

1138, 1139 

III.a.(i), (ii) 

Nonelective employer contributions may be treated as matching contributions for purposes of the actual 

contribution percentage (ACP) test of IRC section 401(m) only if such contributions are nonforfeitable when 

made to the plan and distributable only under the following circumstances: 

1. The employee’s 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) and the distribution is in the form of 

a lump sum; 

3. In the case of a profit-sharing, stock bonus or rural cooperative plan, the employee’s attainment of age 59 1⁄2. 

Nonelective contributions which may be treated as matching contributions must satisfy these requirements without 

regard to whether they are actually taken into account as matching contributions. Section of the plan 

should be amended accordingly. IRC section 401(m)(4)(C) and Regs. sections 1.401(k)-2(a)(6) and -5. 

1147 

III.b. 

Section of the plan should be amended to provide that elective contributions and/or qualified 

nonelective contributions may be treated as matching contributions only if the conditions described in section 

1.401(m)-2(a)(6) of the regulations are satisfied. IRC section 401(m)(3) and Regs. section 1.401(m)-2(a)(6). 

1113, 1114 

IV.c.(i) 

Section of the plan should be amended to provide that the amount of excess aggregate 

contributions under a plan subject to the requirements of section 401(m) will be determined in the following 

manner. First, determine how much the actual contribution ratio (ACR) of the highly compensated employee with the 

highest ACR would have to be reduced to satisfy the actual contribution percentage (ACP) test or cause such ratio to 

equal the ACR of the highly compensated employee with the next highest ratio. Second, this process is repeated until 

the ACP test would be satisfied. The amount of excess aggregate contributions is equal to the sum of these 

hypothetical reductions multiplied, in each case, by the highly compensated employee’s compensation. IRC section 

401(m)(6)(B) and (C) and Regs. sections 1.401(m)-2(b)(2) and (3). 

1118 

IV.c.(ii) 

Section of the plan should be amended to provide that the amount of excess aggregate 

contributions for a plan year shall be determined only after first determining the excess contributions that are 

treated as employee contributions due to recharacterization. Regs. section 1.401(m)-2(a)(4)(ii). 

1119, 1120 

III.c.(iii) 

Section of the plan should be amended to provide that the distribution (or forfeiture, if 

applicable) of excess aggregate contributions will include the income allocable thereto. The income allocable 

to the excess aggregate contributions includes income for the plan year for which the excess aggregate contributions 

were made and for the period between the end of the plan year and the date of distribution (or forfeiture). See section 

1.401(m)-2(b)(2)(iv) of the regulations for a description of the manner in which income allocable to excess aggregate 

contributions is to be calculated. IRC section 401(m)(6)(A) and Regs. section 1.401(m)-2(b)(2)(iv). 

1121 

IV.c.(iv) 

A method of correcting excess aggregate contributions must meet the nondiscrimination requirements of 

section 401(a)(4). A method under which employee contributions are distributed to highly compensated 

employees to the extent necessary to meet the requirements of section 401(m)(2), while matching contributions attributable to such employee contributions remain allocated to the employee’s account, will not meet the requirements of 

section 401(a)(4). Section of the plan should be amended accordingly. Regs. section 1.401(m)-

2(b)(3)(v)(B). 

1122 

IV.c.(v) 

Failure to correct excess aggregate contributions by the end of the 12-month period immediately following 

the end of the plan year for which they were made will cause the plan to fail to satisfy the requirements of 

section 401(a)(4) for the plan year for which the excess aggregate contributions were made and for all subsequent 

years they remain uncorrected. Also, the employer will be liable for a 10% excise tax on the amount of excess 

aggregate contributions unless they are corrected within 2 1/2 months after the close of the plan year for which they 

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1122 (cont.) 

IV.c.(v) 

were made. Section of the plan should be amended accordingly. IRC sections 401(m)(6)(A) and 4979 

and Regs. section 1.401(m)-2(b)(4). 

1123, 1124 

IV.(vi) 

Section 

applicable) of excess aggregate contributions shall be made on the basis of the respective amounts 

of the plan should be amended to provide that the distribution (or forfeiture, if 

attributable to each highly compensated employee. The highly compensated employees subject to actual distribution 

or forfeiture are determined using the “dollar levelling method” starting with the highly compensated employee with the 

greatest dollar amount of employee, matching and other contributions treated as matching contributions for the plan 

year and continuing until the amount of the excess aggregate contributions has been accounted for. IRC section 

401(m)(6)(C) and Regs. section 1.401(m)-2(b)(2)(iii). 

1125 

IV.d. 

Section of the plan should be amended to provide for correction of excess aggregate 

contributions. IRC section 401(m)(6) and Regs. section 1.401(m)-2(b). 

1141, 1142 

V.a. 

Section of the plan should be amended to define highly compensated employee as an 

employee who: 

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. 

1143, 1144, 

1145 

V.b. 

For purposes of the definition of highly compensated employee, section of the plan should be 

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 sections 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% 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. 

1134 

V.c. 

Section of the plan should be amended to define compensation, for purposes of the actual 

contribution percentage (ACP) test of section 401(m) and the determination of excess aggregate 

contributions, in a manner that satisfies section 414(s) and over a period specified in section 1.401(m)-5 of the 

regulations. A definition will satisfy section 414(s) if it conforms to one of the definitions described in sections 1.414(s)-

1(c)(2) and 1.414(s)-1(c)(3) of the regulations. Alternatively, submit a demonstration that the definition is 

nondiscriminatory. IRC sections 401(m)(3)(B) and 414(s) and Regs. sections 1.401(m)-5 and 1.414(s)-1. 

VI. Reserved. 

1152 

VII.a. 

Section of the plan should be amended to provide the matching formula or nonelective 

contribution formula it is using to automatically satisfy section 401(k). 

1153 

VII.b.(i) 

Section of the plan should be amended to specify the applicable vesting schedule for matching 

contributions, if not immediately nonforfeitable. 

1154, 1155 

VII.b.(ii) 

Section of the plan should be amended to specify that (1) matching contributions may not be 

made with respect to employee contributions or elective contributions that in the aggregate exceed 6% of the 

employee’s compensation, (2) the rate of matching contributions may not increase as the rate of employee contributions or elective contributions increases, (3) at any rate of employee contributions or elective contributions the rate of 

Cat. No. 14162J www.irs.gov Form 9416 (Rev. 11-2006) 
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1154, 1155 

(cont.) 

matching contributions that would apply with respect to any HCE who is an eligible employee is no greater than the 

rate of matching contributions that would apply with respect to an NHCE who is an eligible employee and who has the 

same rate of employee contributions or elective contributions and (4) only permissible restrictions are applied to an 

employee’s ability to make elective or employee contributions as described in Regs. section 1.401(m)-3(d)(6). 

1156 

VII.c. 

Section of the plan should be amended to provide that matching contributions made at the 

employer’s discretion may not be made on behalf of any employee that, in the aggregate, could exceed a 

dollar amount equal to 4% of the employee’s compensation. If this condition is not satisfied, the regular 

actual contribution percentage (ACP) test applies. Regs. section 1.401(m)-3(d)(3)(ii). 

1157 

VII.d. 

Section of the plan should be amended to provide that the regular actual contribution 

percentage (ACP) test applies (i) with respect to after-tax employee contributions and (ii) with respect to 

matching contributions under the plan that fail to satisfy the ACP test safe harbor. IRC section 401(m)(11) and Regs. 

section 1.401(m)-3. 

1158 

VII.e. 

Reserved. 

1159, 1160 

VII.f. 

Section of the plan should be amended to provide that matching contributions are taken into 

account for a plan year under the actual contribution percentage (ACP) test safe harbor in accordance with 

the allocation and timing rules of section 1.401(m)-2(a) of the regulations, which provides that a matching contribution 

is only taken into account for a plan year if the contribution is allocated to the employee’s account under the terms of 

the plan as of any date within the plan year, is actually paid to the trust no later than 12 months after the close of the 

plan year, and is made on behalf of an employee on account of the employee’s elective contributions or employee 

contributions for the plan year. Regs. section 1.401(m)-3(j). 

1161 

VII.g. 

Section of the plan should be amended to limit suspension of additional contributions to 6 

months. Regs. section 1.401(m)-3(d)(6)(v). 

1162 

VII.h.(i) 

Section of the plan should be amended for the aggregation and disaggregation rules described 

in Regs. section 1.401(m)-3(d)(5). 

Cat. No. 14162J www.irs.gov Form 9416 (Rev. 11-2006)