###### Editorial Note on Part 1

#### Editorial Note:

IRS redesignated the following sections to appear below the undesignated center heading “Regulations Applicable to Certain Bonds Sold Prior to July 8, 1997” and preceding the undesignated center heading “Deductions for Personal Exemptions.” See 62 FR 25507 and 25513, May 9, 1997 for the specific sections involved in the redesignation.

#### § 1.401(m)-0 Table of contents.

This section contains first a list of section headings and then a list of the paragraphs in each section in §§ 1.401(m)-1 through 1.401(m)-5.

# List of Sections

## § 1.401(m)-1 Employee contributions and matching contributions.

## § 1.401(m)-2 ACP test.

## § 1.401(m)-3 Safe harbor requirements.

## § 1.401(m)-4 Special rules for mergers, acquisitions and similar events. [Reserved]

## § 1.401(m)-5 Definitions.

# List of Paragraphs

## § 1.401(m)-1 Employee contributions and matching contributions.

(a) General nondiscrimination rules.

(1) Nondiscriminatory amount of contributions.

(i) Exclusive means of amounts testing.

(ii) Testing benefits, rights and features.

(2) Matching contributions.

(i) In general.

(ii) Employer contributions made on account of an employee contribution or elective deferral.

(iii) Employer contributions not on account of an employee contribution or elective deferral.

(A) General rule.

(B) Special rule for forfeitures and released ESOP shares.

(C) Exception for bona fide administrative considerations.

(3) Employee contributions.

(i) In general.

(ii) Certain contributions not treated as employee contributions.

(iii) Qualified cost-of-living arrangements.

(b) Nondiscrimination requirements for amount of contributions.

(1) Matching contributions and employee contributions.

(2) Automatic satisfaction by certain plans.

(3) Anti-abuse provisions.

(4) Aggregation and restructuring.

(i) In general.

(ii) Aggregation of employee contributions and matching contributions within a plan.

(iii) Aggregation of plans.

(A) In general.

(B) Arrangements with inconsistent ACP testing methods.

(iv) Disaggregation of plans and separate testing.

(A) In general.

(B) Restructuring prohibited.

(v) Certain disaggregation rules not applicable.

(c) Additional requirements.

(1) Separate testing for employee contributions and matching contributions.

(2) Plan provision requirement.

(d) Effective date.

(1) General rule.

(2) Early implementation permitted.

(3) Applicability of prior regulations.

## § 1.401(m)-2 ACP test.

(a) Actual contribution percentage (ACP) test.

(1) In general.

(i) ACP test formula.

(ii) HCEs as sole eligible employees.

(iii) Special rule for early participation.

(2) Determination of ACP.

(i) General rule.

(ii) Determination of applicable year under current year and prior year testing method.

(3) Determination of ACR.

(i) General rule.

(ii) ACR of HCEs eligible under more than one plan.

(A) General rule.

(B) Plans not permitted to be aggregated.

(iii) Example.

(4) Employee contributions and matching contributions taken into account under the ACP test.

(i) Employee contributions.

(ii) Recharacterized elective contributions.

(iii) Matching contributions.

(5) Employee contributions and matching contributions not taken into account under the ACP test.

(i) General rule.

(ii) Disproportionate matching contributions.

(A) Matching contributions in excess of 100%.

(B) Representative matching rate.

(C) Definition of matching rate.

(iii) Qualified matching contributions used to satisfy the ADP test.

(iv) Matching contributions taken into account under safe harbor provisions.

(v) Treatment of forfeited matching contributions.

(vi) Additional employee contributions or matching contributions pursuant to section 414(u).

(6) Qualified nonelective contributions and elective contributions that may be taken into account under the ACP test.

(i) Timing of allocation.

(ii) Elective contributions taken into account under the ACP test.

(iii) Requirement that amount satisfy section 401(a)(4).

(iv) Aggregation must be permitted.

(v) Disproportionate contributions not taken into account.

(A) General rule.

(B) Definition of representative contribution rate.

(C) Definition of applicable contribution rate.

(D) Special rule for prevailing wage contributions.

(vi) Contribution only used once.

(7) Examples.

(b) Correction of excess aggregate contributions.

(1) Permissible correction methods.

(i) In general.

(A) Additional contributions.

(B) Excess aggregate contributions distributed or forfeited.

(ii) Combination of correction methods.

(iii) Exclusive means of correction.

(2) Correction through distribution.

(i) General rule.

(ii) Calculation of total amount to be distributed.

(A) Calculate the dollar amount of excess aggregate contributions for each HCE.

(B) Determination of the total amount of excess aggregate contributions.

(C) Satisfaction of ACP.

(iii) Apportionment of total amount of excess aggregate contributions among the HCEs.

(A) Calculate the dollar amount of excess aggregate contributions for each HCE.

(B) Limit on amount apportioned to any HCE.

(C) Apportionment to additional HCEs.

(iv) Income allocable to excess aggregate contributions.

(A) General rule.

(B) Method of allocating income.

(C) Alternative method of allocating income for the plan year.

(D) Plan years before 2008.

(E) Alternative method of allocating plan year and gap period income.

(F) Allocable income for recharacterized elective contributions.

(v) Distribution and forfeiture.

(vi) Tax treatment of corrective distributions.

(A) Corrective distributions for plan years beginning on or after January 1, 2008.

(B) Corrective distributions for plan years beginning before January 1, 2008.

(C) Corrective distributions attributable to designated Roth contributions.

(3) Other rules.

(i) No employee or spousal consent required.

(ii) Treatment of corrective distributions and forfeited contributions as employer contributions.

(iii) No reduction of required minimum distribution.

(iv) Partial correction.

(v) Matching contributions on excess contributions, excess deferrals and excess aggregate contributions.

(A) Corrective distributions not permitted.

(B) Coordination with section 401(a)(4).

(vi) No requirement for recalculation.

(4) Failure to timely correct.

(i) Failure to correct within 21⁄2 months after end of plan year.

(ii) Failure to correct within 12 months after end of plan year.

(iii) Special rule for eligible automatic contribution arrangements.

(5) Examples.

(c) Additional rules for prior year testing method.

(1) Rules for change in testing method.

(2) Calculation of ACP under the prior year testing method for the first plan year.

(i) Plans that are not successor plans.

(ii) First plan year defined.

(iii) Plans that are successor plans.

(3) Plans using different testing methods for the ACP and ADP test.

(4) Rules for plan coverage change.

(i) In general.

(ii) Optional rule for minor plan coverage changes.

(iii) Definitions.

(A) Plan coverage change.

(B) Prior year subgroup.

(C) Weighted average of the ACPs for the prior year subgroups.

(iv) Examples.

## § 1.401(m)-3 Safe harbor requirements.

(a) ACP test safe harbor.

(1) Section 401(m)(11) safe harbor.

(2) Section 401(m)(12) safe harbor.

(3) Requirements applicable to safe harbor contributions.

(b) Safe harbor nonelective contribution requirement.

(c) Safe harbor matching contribution requirement.

(d) Limitation on contributions.

(1) General rule.

(2) Matching rate must not increase.

(3) Limit on matching contributions.

(4) Limitation on rate of match.

(5) HCEs participating in multiple plans.

(6) Permissible restrictions on elective deferrals by NHCEs.

(i) General rule.

(ii) Restrictions on election periods.

(iii) Restrictions on amount of contributions.

(iv) Restrictions on types of compensation that may be deferred.

(v) Restrictions due to limitations under the Internal Revenue Code.

(e) Notice requirement.

(f) Plan year requirement.

(1) General rule.

(2) Initial plan year.

(3) Change of plan year.

(4) Final plan year.

(g) Plan amendments adopting nonelective safe harbor contributions.

(h) Permissible reduction or suspension of safe harbor contributions.

(1) General rule.

(i) Matching contributions.

(ii) Nonelective contributions.

(2) Supplemental notice.

(j) Other rules.

(1) Contributions taken into account.

(2) Use of safe harbor nonelective contributions to satisfy other nondiscrimination tests.

(3) Early participation rules.

(4) Satisfying safe harbor contribution requirement under another defined contribution plan.

(5) Contributions used only once.

(6) Plan must satisfy ACP with respect to employee contributions.

## § 1.401(m)-4 Special rules for mergers, acquisitions and similar events. [Reserved]

## § 1.401(m)-5 Definitions.

[T.D. 9169, 69 FR 78184, Dec. 29, 2004, as amended by T.D. 9237, 71 FR 10, Jan. 3, 2006; T.D. 9447, 74 FR 8210, Feb. 24, 2009; T.D. 9641, 78 FR 68738, Nov. 15, 2013]