Insights

IRS Proposes Rule Changing Definitions of Qualified Matching Contributions and Qualified Non-Elective Contributions


On Jan. 18, 2017, the IRS issued proposed regulations amending the definitions of qualified matching contributions (QMACs) and qualified non-elective contributions (QNECs) relating to certain qualified retirement plans that contain cash or deferred arrangements or that provide for matching contributions or employee contributions.

Under the proposed regulations, employer contributions to a plan would be able to qualify as QMACs or QNECs if they satisfy applicable non-forfeitability and distribution requirements at the time they are allocated to participants’ accounts, but need not meet these requirements when they are contributed to the plan. This change allows amounts held as forfeitures in a 401(k) plan to be used to fund qualified non-elective contributions (QNECs) and qualified matching contributions (QMACs).

The IRS is accepting comments on the proposed regulations. These regulations are proposed to apply to taxable years beginning on or after the date that the final regulations are published in the Federal Register. In the meantime, taxpayers may rely on the proposed regulation.

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.

Proposed Rule »