Instructions for Form 5300 Schedule Q |
2006 Tax Year |
This is archived information that pertains only to the 2006 Tax Year. If you are looking for information for the current tax year, go to the Tax Prep Help Area.
Participation, Coverage, and Nondiscrimination Requirements
Line 1.
If "Yes" is checked, attach a schedule labeled Demo 1.
Demo 1 is prepared to show how a plan that is using the qualified separate line of business (QSLOB) rules of section
414(r) satisfies the gateway
test of section 410(b)(5)(B) or satisfies the special rules for employer-wide plans. See Guidelines for Certain Demonstrations on page 2.
If a request for an administrative scrutiny determination on any separate line of business of the employer is pending
with IRS, submit a copy of
the confirmation receipt issued by IRS with the application.
Line 2.
A determination letter issued for a defined benefit plan that requests a determination regarding section 410(b) will
also be a determination
regarding section 401(a)(26).
Line 3.
Determination letters generally do not provide reliance that benefits, rights, and features under a plan satisfy the
nondiscriminatory current
availability requirement of Regulations section 1.401(a)(4)-4(b).
Answer "Yes" only if requesting a determination that any specified benefit, right, or feature meets the nondiscriminatory
current availability
requirement of Regulations section 1.401(a)(4)-4(b).
If "Yes" is checked you must provide a demonstration for each benefit, right, and feature you wish considered.
Label this attachment Demo 3.
Also see Guidelines for Certain Demonstrations on page 2.
Line 4.
Check "Yes" and attach Demo 4 if you are requesting a determination that the plan satisfies the average benefit test
of section 410(b) or the
nondiscrimination requirements of section 401(a)(4) and for purposes of satisfying these requirements, any of the following
apply:
-
The plan is disaggregated because:
-
The plan includes a section 401(k) or 401(m) plan and a portion that is not a section 401(k) or 401(m) plan,
-
The plan includes an ESOP and a portion that is not an ESOP,
-
The employer applies section 410(b) separately to the portion of the plan that benefits only employees who satisfy age and
service
conditions under the plan that are lower than the greatest minimum age and service conditions permissible under section 410(a),
-
The plan benefits employees of more than one qualified separate line of business (unless the plan is tested under the special
rule for
employer-wide plans in Regulations section 1.414(r)-1(c)(2)(ii)),
-
The plan benefits the noncollectively bargained employees of more than one employer.
-
The plan benefits both collectively bargained and noncollectively bargained employees.
-
The plan is permissively aggregated with another plan under Regulations section 1.410(b)-7(d).
-
The plan is restructured into component plans under Regulations section 1.401(a)(4)-9.
See instructions for Demo 4 under Guidelines for Certain Demonstrations on page 3. Also, see the instructions for line 9 for additional
information that may be required in Demo 4.
Line 5.
This line is a request for a determination that the plan satisfies the minimum coverage requirements of section 410(b)
due to satisfying the
average benefit test of 1.410(b)-2(b)(3).
If a determination regarding the average benefit test is being requested, check "Yes" and see the instructions for
Demo 5 under Guidelines for
Certain Demonstrations on page 3.
This determination relates only to the satisfaction of the requirements of section 410(b). This determination is mutually
exclusive of any
determination that the plan may satisfy section 401(a)(4). If the plan must satisfy a general test in order to satisfy section
401(a)(4), a
determination that the plan satisfies the average benefit test is not a determination that the plan's rate groups satisfy
the modified average benefit
test that is included in the general test.
Line 6.
This is exclusively a request for a determination that the plan satisfies the nondiscrimination in amount or benefits
requirements under section
401(a)(4) of the Code using a non-design based safe harbor or a general test. This determination is mutually exclusive of
any determination that the
plan may satisfy section 410(b). A determination that the plan satisfies the average benefit test is not a determination that
the plan's rate groups
satisfy the modified average benefit test that is included in the general test.
If this is a request for a determination regarding a non-design based safe harbor or a general test see the instructions
for Demo 6 under
Guidelines for Certain Demonstrations on pages 4 and 5. The Demo 6 must show that the plan satisfies either:
-
The contributions or benefits general test in Regulations sections:
-
The nondesign-based safe harbors described in Regulations section 1.401(a)(4)-2(b)(3) (safe harbor for uniform point plans)
or Regulations
section 1.401(a)(4)-3(b)(4)(i)(C)(3) (alternative safe harbor for flat benefit plans).
Also enter one of the following letters in the space provided in line 6 that indicates if the determination requested
relates to:
-
A Defined Benefit Plan (DBP) being tested under the general test in Regulations section 1.401(a)(4)-3(c) that involves a
facts and
circumstances determination under the "safety valve" rule in Regulations section 1.401(a)(4)-3(c)(3);
-
A plan being tested under a general test that does not involve a determination under the safety valve rule; or
-
A plan intended to satisfy a nondesign-based safe harbor.
Line 7.
Check line 7(i) "Yes" if a determination is being requested regarding any plan provision which provides for pre-participation
or imputed service as
defined in Regulations section 1.401(a)(4)-11(d)(3)(ii). Check line 7(ii) "Yes" if a determination is being requested for
a plan amendment or, in the
case of an initial determination, a plan provision which provides for a period of past service that exceeds the period set
forth in the safe harbor in
Regulations section 1.401(a)(4)-5(a)(3).
Do not check "Yes" if past service, pre-participation service, or imputed service is credited under the plan solely
to the extent required by one
or more of the following:
-
The service crediting rules under section 410(a) (eligibility), section 411(a) (vesting), section 413 (collectively bargained
plans), or
section 414(a) (service for predecessor employer),
-
The hour of service method under 29 CFR 2530.200b-2 and the elapsed time service-crediting methods under Regulations section
1.410(a)-7,
and
-
The prohibition on double proration of service and compensation in 29 CFR section 2530.204-2(d).
If "Yes" is checked, attach a schedule label Demo 7. See the instructions for Demo 7 under Guidelines for Certain Demonstrations on page
5.
Line 8.
Check "Yes" if a determination is being requested for a plan that is part of a floor arrangement. If “ Yes” is checked, attach a schedule
labeled Demo 8. See the instructions for Demo 8 under Guidelines for Certain Demonstrations on page 5.
Nondiscriminatory Compensation and Employee Contributions
Line 9.
Check “ Yes” if a determination is being requested where:
-
The plan bases contributions or benefits on a definition of compensation that does not satisfy the requirements of Regulations
section
1.414(s)-1(c)(2) or (3); or
-
The plan includes a section 401(k) and/or section 401(m) plan that incorporates an actual deferral percentage or actual contribution
percentage test using a definition of compensation that does not satisfy the requirements of Regulations sections 1.414(s)-1(c)(2)
or (3).
If this plan has been disaggregated into separate plans or restructured into component plans, this line may be checked
“ Yes” to request a
determination if any of the separate disaggregated plans or restructured component plans are described in 1 or 2 above. Also
complete a Demo 4 and
indicate on the Demo 4 each disaggregated plan or component plan to which 1 or 2 applies.
Section 401(k) and 401(m) plans may not be restructured.
Attach Demo 9 if you checked “ Yes” and see the instructions for Demo 9 under Guidelines for Certain Demonstrations on page 5.
Line 10.
Check “ Yes” if this is a defined benefit plan and a determination is being requested regarding employee contributions not allocated
to
separate accounts.
Line 11.
Enter the letter shown on the form that corresponds to the method that is being used to determine the employer-provided
benefit for purposes of
Regulations section 1.401(a)(4)-6(b). The composition-of-workforce and minimum benefit methods may only be used with plans
that satisfy the unit
credit safe harbor in Regulations section 1.401(a)(4)-3(b)(3).
If you enter the letter “ A,” attach a Demo 10. See the instructions for Demo 10 under Guidelines for Certain Demonstrations on page
5. If applicable, also indicate the plan factor.
Line 12.
Enter the letter that corresponds to the method used to show that the employee-provided benefit is nondiscriminatory
in amount. See Regulations
section 1.401(a)(4)-6(c).
If you enter the letter “ C,” attach a Demo 11, if applicable. See the instructions for Demo 11 under Guidelines for Certain
Demonstrations on page 5.
Guidelines For Certain Demonstrations
The following instructions describe additional information that must be included in the demonstrations.
Applicants must follow the guidelines in these instructions and indicate in their demonstrations where the elements in the
guidelines are
addressed. Applicants must explain why any elements have not been addressed.
Information or computations that are used for more than one purpose or provided elsewhere in the application may not be cross-referenced.
Demo 1 – Qualified Separate Lines of Business
Provide a schedule with the following information, as applicable:
-
The Code section(s) for which the employer is testing on a separate line of business basis (for example, section 410(b) or
section
401(a)(26)),
-
The separate lines of business that have employees benefiting under the plan,
-
A demonstration of how the plan meets the nondiscriminatory classification requirement of section 410(b)(5)(B) and Regulations
section
1.414(r)-8(b)(2) on an employer-wide basis, and
-
If the requirements of section 410(b) or section 401(a)(26) are to be applied to this plan on an employer-wide basis under
the special rules
for employer-wide plans, a demonstration of how the plan meets the requirements of the applicable special rule in Regulations
sections
1.414(r)-1(c)(2)(ii) or 1.414(r)-1(c)(3)(ii).
A Demonstration is not required. See explanation for line 2 on the Schedule Q (Form 5300).
Demo 3 – Nondiscriminatory Current Availability of Benefits, Rights, and Features
1.
An applicant requesting a determination that a plan satisfies the nondiscriminatory current availability requirement
of Regulations section
1.401(a)(4)-4(b) for any benefit, right, or feature ("BRF") specified by the applicant should ordinarily demonstrate the following
for each BRF that
the applicant wants considered:
a.
Identify the specific BRF, including terms pertaining to the BRF, such as eligibility conditions, timing, election
rights, etc.
b.
Cite the plan provisions that describe the BRF and all terms relating to the BRF.
c.
Describe any conditions on the availability of the BRF that were disregarded in determining current availability.
d.
If the BRF is contingent on an unpredictable event, describe the contingency and determine current availability as
if the event had occurred.
e.
If applicable, describe how the special rule in Regulations section 1.401(a)(4)-4(d)(3), relating to early retirement
window benefits, has been
applied.
2.
If the BRF is an optional form of benefit, ancillary benefit, or other right or feature that has been aggregated,
for testing purposes, with
another optional form of benefit, ancillary benefit, or other right or feature, respectively, show how the requirements of
Regulations section
1.401(a)(4)-4(d)(4)(i)(A) and (B) are satisfied.
3.
Describe the group of employees to whom the BRF is available and indicate if this group includes any nonexcludable
employees with accrued benefits
who are not currently benefiting ("frozen plan participants").
4.
Demonstrate one of the following with respect to the specified BRF:
a.
The group of employees to whom the benefit is currently available satisfies the section 410(b) ratio percentage test.
b.
The BRF has been prospectively eliminated and satisfies the section 410(b) ratio percentage test as of the elimination
date.
c.
The BRF is available only to an acquired group of employees and the requirements of Regulations sections 1.401(a)(4)-4(d)(1)(i)(A)
and (B) are
satisfied.
d.
The plan is a permissively aggregated plan and the BRF is a spousal benefit described in Regulations section 1.401(a)(4)-4(d)(5).
e.
The plan is an ESOP and the BRF is an investment diversification right or feature or distribution option available
only to all qualified
participants (as defined in section 401(a)(28)(B)(iii)) or the failure of the BRF to satisfy current availability results
solely from the restrictions
of section 409(n).
f.
The plan is a permissively aggregated defined benefit/defined contribution (DB/DC) plan; the BRF is not a single sum
benefit, loan, ancillary
benefit, or benefit commencement date (including the availability of in-service withdrawals); the BRF is provided under only
one type of plan; and the
BRF is currently available to all NHCEs in all plans of the same type as the plan under which it is provided.
5.
If the BRF is available to frozen plan participants, show how one of the requirements in Regulations sections 1.401(a)(4)-4(d)(2)(i)
through (iv)
is satisfied.
Demo 4 – Test for Restructuring, Mandatory Disaggregation, or Permissive Aggregation
Explain the basis of the disaggregation, permissive aggregation, or restructuring; identifying the aggregated or separate
disaggregated plans or
component plans, and demonstrate how any restructured component plans satisfy section 410(b) as if they were separate plans.
Any other plan that has been permissively aggregated with this plan should be identified by:
Describe the benefit or allocation formula of the other plan and indicate if that plan has received or applied for a determination
letter.
Demo 5 – Average Benefit Test
1.
An applicant requesting a determination that a plan satisfies the average benefit test must demonstrate compliance
with the nondiscriminatory
classification test of Regulations section 1.410(b)-4 including, if applicable, the facts and circumstances determination
under Regulations section
1.410(b)-4(c)(3).
The determination regarding the average benefit test is not available to a plan that satisfies the ratio percentage
test.
The demonstration for the average benefit test should provide, for each Highly Compensated Employee (HCE) and each
Non-Highly Compensated Employee
(NHCE) the compensation used in the test, the allocation or benefit being tested and the actual benefit percentages. The average
benefit percentages
for HCEs and NHCEs must be provided.
2.
A plan that is deemed to satisfy the average benefit percentage test under the special rule in Regulations section
1.410(b)-5(f) must demonstrate
that the plan would satisfy the ratio percentage test if the excludable employee and mandatory disaggregation rules for collectively
bargained and
noncollectively bargained employees did not apply.
3.
In addition to the above information, the average benefit percentage demonstration must identify and describe the
method used for determining
employee benefit percentages (see Regulations sections 1.410(b)-5(d) and (e)), include the information listed below, under
the heading All
Plans, as applicable.
The demonstration must include the portion of the coverage test showing the data used in the calculations and the
calculations for each
participant. Participants need not be identified. However, the IRS may request that additional information be submitted if
necessary.
All plans using the average benefit test must also include the following information on Demo 5:
1.
The testing period (see Regulations section 1.410(b)-5(e)(5) for an optional averaging rule).
2.
The definition of testing service (including imputed and pre-participation service).
3.
A description of the testing group (see Regulations section 1.410(b)-7(e)).
4.
Whether the employee benefit percentages are determined on a contributions or benefits basis.
5.
Whether permitted disparity under Regulations section 1.401(a)(4)-7 is imputed in determining employee benefit percentages.
6.
An explanation of how allocation or accrual rates are grouped on the test.
7.
A description of how contributions or benefits are normalized, including actuarial assumptions used.
8.
The definition of section 414(s) compensation used in determining plan year compensation or average annual compensation
and a demonstration showing
the definition as nondiscriminatory. If plan year compensation or average annual compensation is determined using a definition
of compensation that
satisfies Regulations section 1.414(s)-1(c)(2) or (3) the explanation should state whether the definition satisfies Regulations
section
1.414(s)-1(c)(2) or (3). For guidance pertaining to this demonstration, see the guidelines under the Demo 9 instructions on
page 5 pertaining to
nondiscriminatory compensation.
9.
A description of the method of determining compensation used in determining employee benefit percentages.
10.
The testing age of employees (not applicable to defined contribution plans testing on a contribution basis).
Plans with Defined Benefit Plans in the Testing Group
Plans with DBP's in the testing group must also provide the following information if applicable.
11.
Show if accruals after normal retirement age are taken into account and, if such accruals are disregarded as provided
in Regulations section
1.401(a)(4)-3(f)(3), the basis on which they are disregarded.
12.
Show if most valuable rates must be used under Regulations section 1.410(b)-5(d)(7), and, if so, show how those rates
are determined.
13.
Show if a defined benefit plan disregards offsets described in Regulations section 1.401(a)(4)-3(f)(9), give a description
of such offsets, and
show how they satisfy Regulations section 1.401(a)(4)-3(f)(9).
14.
Show if any disability benefits are taken into account in determining employees' accrued benefits under Regulations
section 1.401(a)(4)-3(f)(2),
and, if so, cite the plan provisions that permit these disability benefits to be taken into account.
15.
Show if any other special rules in testing a plan for nondiscrimination in amounts are applied. For example, the rules
applicable to the
determination of benefits on other than a plan-year basis described in Regulations section 1.401(a)(4)-3(f)(6), the adjustments
for certain plan
distributions provided in Regulations section 1.401(a)(4)-3(f)(7), and the adjustment for certain qualified preretirement
survivor annuity charges as
provided in Regulations section 1.401(a)(4)-3(f)(8).
16.
Plans with employee contributions not allocated to separate accounts: give a description of the method for determining
the employer-provided
accrued benefit under Regulations section 1.401(a)(4)-6(b) and the location of relevant plan provisions. If the method for
determining the
employer-provided accrued benefit is the composition-of-workforce method, the demonstration must show that the eligibility
requirements of Regulations
section 1.401(a)(4)-6(b)(2)(ii) are satisfied; if the grandfather rule of Regulations section 1.401(a)(4)-6(b)(4) is used,
the demonstration must
show, if applicable, that the benefits provided on account of employee contributions at lower levels of compensation are comparable
to those provided
on account of employee contributions at higher levels of compensation.
Employee Benefit Percentages Determined Using Cross-Testing
17.
Provide a description of the method used to determine equivalent allocations and benefits.
A request for a determination that a plan satisfies any of the general tests in Regulations sections
must include a nondiscrimination test showing that the plan passes the relevant general test, and provide the information
listed under
All Plans (unless otherwise noted), and if applicable, under Defined Benefit Plans Only or Cross-Tested Plans Only.
However, the IRS may request that additional information be submitted if necessary.
All Plans (unless otherwise noted)
All plans must submit the information requested in items 1 through 11 (below).
1.
Provide the portion of the nondiscrimination test that provides the data for each participant and demonstrates that
the plan satisfies section
401(a)(4). Participants need not be identified by name. Tests that include two or more component plans (such as profit-sharing,
money purchase, 401(k)
and 401(m)) should show the allocations or benefits under each component plan.
2.
Identify each rate group under the plan and include a demonstration of how each rate group satisfies section 410(b).
If the plan is a DBP that is
being tested on the basis of the amount of benefits, rate groups must be determined on the basis of both normal and most valuable
accrual rates which
are expressed as a dollar amount or a percentage of compensation. If the most valuable accrual rate is determined in accordance
with the special rule
in Regulations section 1.401(a)(4)-3(d)(3)(iv) (floor on most valuable accrual rate), this must be indicated.
3.
State whether the plan is being tested on a contributions or benefits basis.
4.
Provide the plan year being tested.
5.
Provide a description of the method of determining allocation or accrual rates, and if the plan is tested on a benefits
basis, the measurement
period and definition of testing service (including imputed and pre-participation service).
6.
State whether the test is imputing permitted disparity under Regulations section 1.401(a)(4)-7.
7.
Provide an explanation of how allocation or accrual rates are grouped.
8.
Provide an explanation of how benefits are normalized on the test, including the actuarial assumptions used (not applicable
to defined contribution
plans testing on a contributions basis).
9.
State the definition of section 414(s) compensation used in determining plan year compensation or average annual compensation
and a demonstration
showing the definition as nondiscriminatory. If plan year compensation or average annual compensation is determined using
a definition of compensation
that satisfies Regulations sections 1.414(s)-1(c)(2) or (3) state whether the definition satisfies 1.414(s)-1(c)(2) or whether
the definition
satisfies 1.414(s)-1(c)(3). See the guidelines under the Demo 9 instructions pertaining to nondiscriminatory compensation
for guidance pertaining to
this demonstration.
10.
Provide the method of determining average annual compensation used in testing the plan for nondiscrimination as defined
in Regulations section
1.401(a)(4)-3(e)(2) or give a description of the period used in determining plan year compensation.
11.
Provide the testing age of employees, include fractions of year if test is based on fractional age (not applicable
to a Defined Contribution Plan
(DCP) testing on a contributions basis).
Defined Benefit Plans Only
All DBP's must also provide the following information if applicable:
12.
State whether accruals after normal retirement age are taken into account, and if such accruals are disregarded as
provided in Regulations section
1.401(a) (4)-3(f)(3), provide the basis on which they are disregarded.
13.
State whether early retirement window benefits are taken into account in determining accrual rates and whether such
benefits are being disregarded
under Regulations section 1.401(a)(4)-3(f)(4)(ii). Also provide the basis on which they are disregarded.
14.
State whether any unpredictable contingent event benefits were taken into account in determining accrual rates under
Regulations section
1.401(a)(4)-3(f)(5) and provide the basis on which they are taken into account.
15.
State whether the plan disregards offsets described in Regulations section 1.401(a)(4)-3(f)(9), provide a description
of such offsets, and show how
they satisfy Regulations section 1.401(a)(4)-3(f)(9).
16.
State whether any disability benefits are taken into account in determining employees' accrued benefits under Regulations
section
1.401(a)(4)-3(f)(2), and if so, cite the plan provisions that permit these disability benefits to be taken into account.
17.
State whether any other special rules in Regulations section 1.401(a)(4)-3(f) are applied in testing a plan for nondiscrimination
in amount, for
example:
-
The rules applicable to the determination of benefits on other than a plan-year basis described in Regulations section
1.401(a)(4)-3(f)(6),
-
The adjustment for certain plan distributions provided in Regulations section 1.401(a)(4)-3(f)(7), and
-
The adjustment for certain qualified preretirement survivor annuity charges as provided in Regulations section
1.401(a)(4)-3(f)(8).
18.
Plans with employee contributions not allocated to separate accounts should include:
-
A description of the method for determining whether employee-provided accrued benefits are nondiscriminatory under Regulations
section
1.401(a)(4)-6(c),
-
The method for determining the employer-provided accrued benefit under Regulations section 1.401(a)(4)-6(b), and
-
The location of relevant plan provisions.
If the method for determining the employer-provided accrued benefit is the composition-of-workforce method, the demonstration
must show that the
eligibility requirements of Regulations section 1.401(a)(4)-6(b)(2)(ii) are satisfied.
If the grandfather rule of Regulations section 1.401(a)(4)-6(b)(4) is used, the demonstration must show, if applicable,
that the benefits provided
on account of employee contributions at lower levels of compensation are comparable to those provided on account of employee
contributions at higher
levels of compensation.
19.
If the plan would otherwise fail to satisfy the general test in Regulations section 1.401(a)(4)-3(c)(1), and a determination
is being sought that
the failure may be disregarded as permitted by the special rule in Regulations section 1.401(a)(4)-3(c)(3), describe the relevant
facts and
circumstances that support the use of this rule.
20.
Provide a description of the method used to determine equivalent allocations and benefits.
21.
For defined contribution plans, the demonstration must list each participant's allocation rate for the plan being
tested and list the equivalent
benefit accrual rate (including component plans) for each participant.
Demo 6 – Safe Harbor for Uniform Points Plans
Each demonstration of the safe harbor for uniform points plans in Regulations section 1.401(a)(4)-2(b)(3) should include the
following information:
1.
Provide a description of the plan's allocation formula and the location of relevant plan provisions.
2.
State the definition of section 414(s) compensation used in determining plan year compensation and give a demonstration
showing the definition as
nondiscriminatory. If the plan determines plan year compensation using a definition of compensation that satisfies Regulations
section
1.414(s)-1(c)(2) or (3), state whether the definition satisfies 1.414(s)-1(c)(2) or (3).
See the guidelines in Demo 9 below pertaining to nondiscriminatory compensation for guidance pertaining to this demonstration.
3.
Provide the portion of the nondiscrimination test that provides the data for each participant and demonstrates that
the plan satisfies section
401(a)(4). The data must include the units for each participant being tested and the underlying basis for the units such as
age, years of service, or
compensation. Show the allocation rate for each eligible participant. Show the average of the allocation rates (determined
without imputing permitted
disparity) for the highly compensated and for the nonhighly compensated employees benefiting under the plan.
Demo 6 – Alternative Safe Harbor for Flat Benefit Plans
Each demonstration of the alternative safe harbor for flat benefit plans in Regulations section 1.401(a)(4)-3(b)(4)(i)(C)(3)
must set forth the
average of the normal accrual rates for all nonhighly compensated nonexcludable employees and the average of the normal accrual
rates for all highly
compensated nonexcludable employees. In addition, the demonstration should provide the additional information described under
Demo
6–General Test, relating to the determination of normal accrual rates, except for the information described in paragraphs numbered 1, 2,
6, 18, and 19.
Demo 7 – Test for Pre-participation or Imputed Service
If a determination is being requested, attach a schedule that includes the following:
1.
A description of the nature of the grant of past service or pre-participation or imputed service,
2.
The location of the various plan provisions that provide for the granting of the service, and
3.
In the case of pre-participation or imputed service, state if the service is being taken into account in determining
if the plan satisfies
Regulations section 1.401(a)(4)-1(b)(2).
Demo 8 – Test for Floor Offset Arrangement
If a determination is being requested, attach a statement giving the name, EIN, and plan type (for example, defined benefit
or profit-sharing) of
the other plan that is part of the arrangement.
Also indicate if the other plan has received a favorable determination letter or is requesting a determination letter simultaneously
with this
application.
Demo 9 – Nondiscriminatory Compensation
If a determination is being requested, a demonstration that a definition of compensation is nondiscriminatory under the test
in Regulations section
1.414(s)-1(d) should include the following information:
1.
It should state if the demonstration relates to a definition used to determine contributions or benefits, or a definition
used in a section 401(k)
and/or section 401(m) plan's ADP and/or ACP test.
2.
It should state the definition of compensation being tested (and cite the plan provision where applicable), and indicate
whether the definition
uses rate of compensation or includes prior-employer compensation or imputed compensation.
3.
It should identify the period for which compensation data is given.
4.
It should state whether the test is based on the compensation of all employees benefiting under the plan or all employees
benefiting under all
plans of the employer for which the same alternative definition of compensation is used to determine that the plan satisfies
section 401(a)(4). It
should also state whether all employees with zero total compensation have been excluded from the test. The demonstration should
state the numbers of
HCEs and NHCEs whose compensation is taken into account in the demonstration.
5.
For both the highly compensated and nonhighly compensated groups of employees, it should state whether the test uses
an aggregate, individual, or
other reasonable method to calculate inclusion percentages. If an “ other” method is used, this should be described.
6.
With regard to the determination of total compensation and compensation included under the definition being tested,
the demonstration should:
a.
Specify the section 415(c)(3) definition of compensation used in determining total compensation;
b.
Indicate if total compensation includes elective contributions and deferred compensation and, if applicable, if and
how the adjustment required by
Regulations section 1.414(s)-1(d)(3)(ii)(B) has been made; and
c.
State if, for purposes of the test, compensation included under the definition being tested is limited to total compensation
and if both total
compensation and compensation included under the definition being tested are limited to amounts not in excess of the limit
in section 401(a)(17).
7.
The demonstration should show, for both groups of employees, the respective inclusion percentages, and also describe
the manner in which such
inclusion percentages are determined.
8.
Finally, if the HCEs inclusion percentage is greater than the NHCEs inclusion percentage, the demonstration should
set forth any facts relevant to
whether the difference is de minimis.
Demo 10 – Employer-Provided Benefit Method
If a determination is being requested attach a demonstration showing that the eligibility requirements of Regulations section
1.401(a)(4)-6(b)(2)(ii) are satisfied. If applicable, also indicate the plan factor.
Demo 11 – Test to Show Employer-Provided Benefit is Nondiscriminatory in Amount
If a determination is being requested attach a demonstration, if applicable, that the benefits provided on account of employee
contributions at
lower levels of compensation are comparable to those provided on account of employee contributions at higher levels of compensation,
as required by
Regulations section 1.401(a)(4)-6(c)(4)(ii)(D).
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