IRS publishes final regulations for 401(k) plans addressing QMACs and QNECs

Tax Hot Topics newsletterThe IRS published final regulations (T.D. 9835) amending the definitions of qualified matching contributions (QMACs) and qualified non-elective contributions (QNECs) for certain qualified retirement plans that contain cash or deferred arrangements under Section 401(k). Under these regulations, employer contributions to a plan are QMACs or QNECs if they satisfy the applicable non-forfeitability requirements and distribution limitations when allocated to plan participant accounts, rather than at the time of contribution. The regulations allow amounts forfeited by former plan participants to be used to fund QMACs and QNECs.

According to the preamble to the regulations, Section 411(d)(6), which prohibits plan amendments that decrease the accrued benefits under the plan, does not apply to plan sponsors who adopt plan amendments to define QMACs and QNECs consistently with the final regulations if applied on a prospective basis. 

The regulations are effective July 20, 2018, and apply to plan years beginning on or after July 20, 2018. Taxpayers may apply these regulations to earlier periods.

Contact Jeffrey Martin
Washington National Tax Office
T +1 202 521 1526

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