treated as such an arrangement if any other benefit 
is conditioned (directly or indirectly) on the em-
ployee electing to have the employer make or not 
make contributions under the arrangement in lieu of 
receiving cash. The preceding sentence shall not 
apply to any matching contribution made by reason 
of such an election. 
‘‘(2) COORDINATION WITH OTHER PLANS.—Any 
employer contribution made pursuant to an employ-
ee’s election under an employer retirement savings 
account arrangement shall not be taken into account 
for purposes of determining whether any other plan 
meets the requirements of section 401(a) or 410(b). 
This paragraph shall not apply for purposes of de-
termining whether a plan meets the average benefit 
requirement of section 410(b)(2)(A)(ii). 
‘‘(e) DEFINITIONS.—For purposes of this section— 
‘‘(1) ELIGIBLE EMPLOYEE.—The term ‘eligible 
employee’ means any employee who is eligible to 
benefit under the employer retirement savings ac-
count arrangement. 
‘‘(2) HIGHLY COMPENSATED EMPLOYEE.—For 
purposes of this subsection, the term ‘highly com-
pensated employee’ has the meaning given such term 
by section 414(q).
‘‘(3) MATCHING
CONTRIBUTION.—The term 
‘matching contribution’ means— 
‘‘(A) any employer contribution made to a 
defined contribution plan on behalf of an em-
ployee on account of an employee contribution 
made by such employee, and 
‘‘(B) any employer contribution made to a 
defined contribution plan on behalf of an em-
ployee on account of an employee’s elective de-
ferral. 
‘‘(4) ELECTIVE DEFERRAL.—The term ‘elective 
deferral’ means any employer contribution described 
in section 402(g)(3). 
‘‘(5) 
QUALIFIED
NONELECTIVE
CONTRIBU-
TIONS.—The term ‘qualified nonelective contribu-
tion’ means any employer contribution (other than a 
matching contribution) with respect to which— 
‘‘(A) the employee may not elect to have 
the contribution paid to the employee in cash 
instead of being contributed to the plan, and 
‘‘(B) the requirements of paragraphs (2) 
and (3) of subsection (b) are met. 
‘‘(6) COMPENSATION.—The term ‘compensa-
tion’ has the meaning given such term by section 
414(s).
‘‘(f) ARRANGEMENT NOT DISQUALIFIED IF EXCESS 
CONTRIBUTIONS DISTRIBUTED.— 
‘‘(1) IN
GENERAL.—An employer retirement 
savings account arrangement shall not be treated as 
failing to meet the requirements of subsection 
(c)(1)(A) for any plan year if, before the close of the 
following plan year— 
‘‘(A) the amount of the excess contribu-
tions for such plan year (and any income allo-
cable to such contributions) is distributed, or 
‘‘(B) to the extent provided in regulations, 
the employee elects to treat the amount of the 
excess contributions as an amount distributed 
to the employee and then contributed by the 
employee to the plan. 
Any distribution of excess contributions (and in-
come) may be made without regard to any other pro-
vision of law. 
‘‘(2) EXCESS
CONTRIBUTIONS.—For purposes 
of paragraph (1), the term ‘excess contributions’ 
means, with respect to any plan year, the excess 
of— 
‘‘(A) the aggregate amount of employer 
contributions actually paid over to the trust on
behalf of highly compensated employees for 
such plan year, over 
‘‘(B) the maximum amount of such con-
tributions permitted under the limitations of 
subsection (c)(1)(A) (determined by reducing 
contributions made on behalf of highly com-
pensated employees in order of the contribution 
percentages beginning with the highest of such 
percentages). 
‘‘(3) METHOD OF DISTRIBUTING EXCESS CON-
TRIBUTIONS.—Any distribution of the excess con-
tributions for any plan year shall be made to highly 
compensated employees on the basis of the amount 
of contributions by, or on behalf of, each of such em-
ployees. 
‘‘(4) ADDITIONAL TAX UNDER SECTION 72(t) 
NOT TO APPLY.—No tax shall be imposed under sec-
tion 72(t) on any amount required to be distributed 
under this subsection. 
‘‘(5) TREATMENT
OF
MATCHING
CONTRIBU-
TIONS FORFEITED BY REASON OF EXCESS DEFER-
RAL OR CONTRIBUTION.—For purposes of subsection 
(b)(3), a matching contribution shall not be treated 
as forfeitable merely because such contribution is 
forfeitable if the contribution to which the matching