New DocsEngine for Pension Update for QMAC-QNEC Amendment
As we mentioned last month, the IRS has issued a proposed regulation that revises the definition of qualified matching contributions (QMACs) and qualified non-elective contributions (QNECs) under the Code Sections 401(k) and 401(m) cash or deferred regulations, including those plans utilizing a safe harbor feature.
Changes to the Plan
This amendment allows 401(k) plans to start utilizing the new rules so that forfeited employer contributions would qualify as a QMAC or a QNEC if such contributions satisfy the nonforfeitability and distribution requirements features of those qualified contributions at the time they are allocated to participants instead of when they are contributed to the plan. Consequently, forfeitures designed to reduce future employer contributions may be used toward QNECs or QMACs in a failed ADP/ACP test or as a safe harbor contribution.
The proposed regulations will be effective for taxable years beginning on or after publication in final form, however, plans may utilize the changes for plan years beginning in 2017. If the final regulations are found to be more restrictive, such amendment will be applied after the date the regulations are finalized.
Good-faith Amendment Available
A good-faith amendment, signed by Document Agility, has been added to the Volume Submitter and Prototype Defined Contribution basic plan documents revising the QMAC and QNEC definitions and is also available in a separate PDF format on the AccuDraft website.
What do I need to do?
For your current 401(k) adopting employers, please provide a copy of the appropriate amendment to your adopting employer at your earliest convenience. Copies of the following four amendments in PDF format are available in the Amendments section of the the Resources page of the AccuDraft website at www.accudraft.com:
Compliance Amend QMAC QNEC - VS Contract Style
Compliance Amend QMAC QNEC - VS Adoption Agreement
Compliance Amend QMAC QNEC - NS Proto 401(k)
Compliance Amend QMAC QNEC - KSOP
No formal amendment is required by adopting employers, unless a plan has not been designed where forfeitures are used to reduce future contributions.
For those who use the KSOP plan, this document has been revised at the definitions of QMACs and QNECs to reflect the proposed regulations. In lieu of amending and outputting the entire KSOP document for this change, a separate amendment has been designed that may be adopted by sponsoring employers.
What is New in this Release?
This update contains the following items:
A good-faith amendment has been added at the end of the Volume Submitter Defined Contribution Contract Style plan document revising the QMAC and QNEC definitions.
A good-faith amendment has been added at the end of the Volume Submitter Defined Contribution Adoption Agreement basic plan document revising the QMAC and QNEC definitions.
A good-faith amendment has been added at the end of the NS Prototype Defined Contribution basic plan document revising the QMAC and QNEC definitions.
The KSOP has been amended at the definitions of QMAC and QNEC.
A gramatical correction was made to the Administrative Policies document in all of the plan types.
How do I access the updated versions of these documents?
When you next create a DC VS Contract Style plan, the amendment will be located at the end of the plan document. And when you next create a DC VS Adoption Agreement Style or NS Proto 401(k) plan, the amendment will be located at the end of the basic plan document. You do not need to take any additional steps to access the new versions of these documents.
If you create KSOP plans, when you next create one, you will automatically be using the latest and most up-to-date template, and you do not need to take any additional steps to access the new version.
Have a Question or Need Information?
As always, if you have any questions on this new update, feel free to contact us at 877-346-5994 or email@example.com.
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