Employee Benefit Plans Nondiscrimination Compliance Testing Practice Aid This ing practice aid is a matrix designed to assist auditors in determining which types of compliance ing is required for which types of qualified retirement plans. The matrix is organized by contribution type because one plan may contain different features, each of which has different ing requirements. At the end of the matrix is a glossary of terminology. (ADP) (ACP) 401(a)(4) 1. 401(k) plan deferrals 2. 401(k) safe harbor plan deferrals 3. 403(b) plan deferrals 4. 401(k)/403(b) plan matching Universal availability requirement if different groups receive different rates of matching Top-Heavy for all for all for all for all 415
5. 401(k)/403(b) safe harbor plan match (ADP) (ACP) 401(a)(4) if different groups receive different rates of matching Top-Heavy for all 415 6. 401(k)/403(b) plan non-elective contribution 7. Employee aftertax for all for all 8. Money purchase pension plan for all
(ADP) (ACP) 401(a)(4) Top-Heavy 415 9. Profit sharing plan for all 10. ESOP plan for all 11. Defined benefit pension plan benefit accruals for all 12. Frozen plans or any year in which no contribution is made for all
(ADP) (ACP) 401(a)(4) Top-Heavy 415 13. For all plans, different vesting or other features for different groups of participants within plan See below for Compliance Testing Glossary
Compliance Testing Glossary Highly Compensated Employee: An employee whose is over a set amount for a given year (e.g., over $115,000 for 2013), or who is a 5% or more owner of the plan sponsor. The threshold is measured as of the preceding plan year. The ownership threshold is measured as of the current year or the preceding year. Most s compare benefits received by Highly Compensated Employees to benefits received by Non-highly Compensated Employees. Non-highly Compensated Employee: Any employee who is not a Highly Compensated Employee. (ADP): A that limits 401(k) deferrals made by Highly Compensated Employees, measured as a, by not permitting that percentage to exceed the deferrals made by Nonhighly Compensated Employees ly by more than a certain percentage (ly 2%). (ACP): Similar to the ADP, but this one measures matching as a, then compares the percentage received by the Highly Compensated Employees to the percentage received by the Non-highly Compensated Employees, applying a similar 2% limit on the amount by which the Highly Compensated Employees percentage may exceed the percentage of the Non-highly Compensated Employees. Dollar Cap Limitation: A limit on the maximum amount that may be deferred pre-tax by participants during the calendar year, including an extra catch-up for participants who attain age 50 or higher during the year. For example, the cap for 2013 is $17,500 and the additional catch-up amount is $5,500. Considered Compensation Limitation: The maximum amount of that may be used when calculating plan benefits,, etc. even if the participant actually received a greater amount during the relevant year. For example, the for 2013 is $380,000. Coverage Test: The requirement that any qualified retirement plan must cover a high enough Non-highly Compensated Employees compared to the Highly Compensated Employees. This may be calculated in several different ways, and special ing is required if the plan sponsor is a member of a related group of corporations or partnerships with common owners.
Compliance Testing Glossary 401(a)(4) General Nondiscrimination Test: The that is used when, rights, benefits or features of a plan are available for Highly Compensated Employees but not all Non-highly Compensated Employees. For example, different matching contribution rates within the same plan might require this. Top-Heavy Test: In a defined contribution plan, this s for whether 60% or more of all balances in the plan belong to Key Employees (similar to, but not identical to, the definition for Highly Compensated Employees). If a defined contribution plan is top heavy, a minimum contribution must be made for all Non-Key Employees. Analogous rules apply to defined benefit plans. 415 Annual Additions Limitation Test: An overall limit on the total amount of defined contribution plan a participant may receive. This counts all, including deferrals, matching, and non-elective. For example, the defined contribution for 2013 is $51,000. Analogous rules apply to defined benefit plans.