3804 / What special rules apply to employer matching contributions? What rules apply to employee contributions?
A defined contribution plan that provides for employee contributions or matching contributions, typically a 401(k) plan ( Q 3753), must satisfy the Actual Contribution Percentage (“ACP”) test or one of the alternatives to it ( Q 3805) to meet the nondiscrimination in amount requirement of IRC Section 401(a)(4).1 With respect to matching contributions only, two alternative plan designs are available that are deemed to satisfy the ACP test: a SIMPLE 401(k) plan ( Q 3778), or a safe harbor design ( Q 3773).2 In plan years beginning after December 31, 2007, a “qualified automatic contribution arrangement” will satisfy the ACP test requirement with respect to matching contributions ( Q 3762).3
Matching contributions are subject to a three year cliff or five year graduated vesting schedule ( Q 3869).
A plan will not be treated as violating the ACP test merely on account of the making of, or the right to make, catch-up contributions by participants age 50 or over under the provisions of IRC Section 414(v) so long as a universal availability requirement is met ( Q 3761).4