July 24, 2018
On July 20, 2018, the IRS issued final regulations amending the definitions of qualified matching contributions (QMACs) and qualified nonelective contributions (QNECs) relating to certain qualified retirement plans that contain cash or deferred arrangements or that provide for matching contributions or employee contributions.
The final regulations are virtually unchanged in comparison to the proposed regulations (which were proposed in January 2017). Under these regulations, employer contributions to a plan would be able to qualify as QMACs or QNECs if they satisfy applicable nonforfeitability and distribution requirements at the time they’re allocated to participants’ accounts, but they need not meet these requirements when they’re contributed to the plan. This change allows amounts held as forfeitures in a 401(k) plan to be used to fund QNECs and QMACs.
The final regulations are effective on July 20, 2018, and apply to plan years beginning on or after that date. However, the IRS will allow taxpayers to rely upon these rules in earlier periods.
Employers maintaining tax-qualified plans that contain cash or deferred arrangements or provide for matching contributions or employee contributions should take note of these proposed changes.
Final Rule »