A guide to the TIAA matching test software Version 3.1
Contents Introduction Who should use the software? Testing 401(k) plans
4 4
Obtaining and installing the software
5
Modifying the plan Adding an employee to the software database Edit an employee Delete an employee Highly compensated status
Starting and exiting the program
7
Results command (file menu) Passing the test Failing the test
26 27 28
Exploring the user interface Current year testing method Prior year testing method
8 8 9
Refunding excess aggregate contributions
31
Exhibit A. Print report format requirements
33
Menus10 File menu commands 10 Edit menu commands 10 Tool menu commands 10 Help menu commands 10
Index command (help menu)
34
Testing 401(k) Plans
34
Minimum coverage test
35
General nondiscrimination test
35
Toolbar11
III. Key definitions
Status bar
Automatic enrollment safe harbors Average contribution percentage Church plan Contributory plan Design-based safe harbors Eligible employees Excess aggregate contributions Highly compensated employee Mandatory plan One-time irrevocable salary reduction agreement Qualified non-elective contributions (QNCs)
37 37 37 37 38 38 38 38 39
Getting help
39
Overview2
I. Getting to know the program
11
II. Working with dialogs Import command (file menu) Method 1. Importing employee data from an Excel worksheet Method 2. Importing employee data from a text file Comma delimited (CSV) format Fixed format
13
Current plan profile command (tools menu)
17
Plan configuration command (tools menu) Institution name Definition of highly compensated employee amount Limit on includable compensation Automatically determined HC/NHC status Use prior year information for Matching Test
18 18
14 15 16 16
22 22 24 25 25
39 39
19 20 21 21
A guide to the TIAA matching test software
1
Introduction Overview Contributory retirement plans with any period of voluntary participation must satisfy 401(m) Matching Test requirements. Contributory plans are not subject to the Matching Test if any of the following conditions apply to the plan: WW
No employees eligible to participate in the plan qualified as highly compensated employees (HCs), based on compensation in the prior plan year.
WW
Participation in the plan is required as a condition of employment.
WW
All employee contributions are made under one-time irrevocable salary reduction agreements and the plan permits no after-tax employee contributions.
WW
The plan satisfies one of the design-based or auto enrollment safe harbors.
The 401(m) Matching Test is designed to ensure that employer matching contributions and after-tax employee contributions (if any) for highly compensated employees (HCs)
2 A guide to the TIAA matching test software
are not disproportionately high when compared to these types of contributions for non-highly compensated employees (NHCs). When a retirement plan fails the matching test, the amounts by which employer matching contributions and any employee after-tax contributions for HCs exceed the limits of IRC Section 401(m) are considered to be “Excess Aggregate Contributions.” If the limits are exceeded, a correction must be made before the end of the next plan year or the plan risks being disqualified. If a plan is disqualified, all contributions in the year of the defect, and for subsequent years until the defect is corrected, are taxable to the participants. All of an employer’s voluntary contributory retirement plans should generally be treated as a single plan for all nondiscrimination testing purposes. However, 403(b) and non-403(b) plans should generally be treated as separate plans and union and non-union employees should also generally be tested separately, even if covered by the same plan.
In order to pass the Matching Test, the Average Contribution Percentage (ACP) for eligible highly compensated employees (HCs) can’t exceed the following limits: WW
Two times the ACP for eligible non-highly compensated employees (NHCs) if the NHCs’ ACP is not more than 2%
WW
The NHCs’ ACP plus 2%, if the NHCs’ ACP is more than 2% but not more than 8%
WW
The NHCs’ ACP times 1.25, if the NHCs’ ACP is more than 8%
All employees eligible for employer matching contributions should be entered into the Matching Test system database even if they do not receive employer matching contributions because they do not make voluntary contributions of their own to the plan. But employees not eligible for employer matching contributions are excluded unless they make after-tax contributions, so data for them should not be entered into the Matching Test System.
If you use TIAA’s Matching Test System software, it will provide a printout that will document the results of the Matching Test for your plan. If you fail the test, the software will also automatically generate a report that will give you an employee-by-employee breakdown of the additional contributions for non-highly compensated employees or refunds of excess aggregate contributions for highly compensated employees that will enable your plan to meet Matching Test requirements. The accuracy of the results produced by the Matching Test system is dependent upon the accuracy of the information input into the system and the calculations reflect TIAA’s current understanding of the application of section 401(m) of the Internal Revenue Code to 403(b) retirement plans. Because TIAA doesn’t provide legal, tax or accounting advice, we suggest that you review your situation with your legal counsel before testing your plan for compliance.
A guide to the TIAA matching test software
3
Who should use the software? Version 3.1 of the TIAA Matching Test System software will generally function on any computer operating on Windows. It can be used to perform the 401(m) Matching Test by most employers with voluntary contributory 403(b) retirement plans that are subject to the test. A voluntary contributory retirement plan is one in which both employer and employees make contributions, employee contributions are voluntary and the employer does not make contributions for employees who do not make voluntary contributions of their own to the plan. The software can also be used to conduct the Matching Test on the matching portion of a plan that also has a noncontributory base employer contribution. The software should not be used to conduct nondiscrimination testing on plans that are not subject to the Matching Test because of one or more of the following: WW
No employee eligible to participate in the plan qualifies as a highly compensated employee (see page 21 of this manual for a definition of highly compensated),
WW
The plan is sponsored by a state college, a public school or other public employer, or is a church plan not subject to nondiscrimination (see page 39),
WW
Participation in the plan is mandatory as a condition of employment for all eligible employees (see page 41),
WW
All employee contributions are made under one-time irrevocable salary reduction agreements (see page 42) and employees are not permitted to make after-tax contributions, or
WW
The plan satisfies the 401(m) Matching Test requirements by qualifying for one of the Design-Based Safe Harbors created by the Small Business Job Protection Act of 1996 or the Automatic Enrollment Safe Harbors created by the Pension Protection Act of 2006 (see page 40).
This software is intended primarily for use by employers that have only one retirement plan—a contributory 403(b) plan—or that have two or more contributory 403(b) plans that can all be treated as a single plan for nondiscrimination testing purposes. In most cases, all of an employer’s contributory 403(b) plans can be treated as a single plan for nondiscrimination testing purposes. But 403(b) plans generally should not be aggregated with other types of plans (such as 401(k) or 401(a) plans). And non-contributory plans, even if they are 403(b) plans, generally must be treated as separate from contributory plans for nondiscrimination testing. The software can be used to conduct the Matching Test by an employer even if union employees are eligible for the plan, but when conducting the test, union employees should generally not be included, even if covered by the same plan as non-union employees.
Testing 401(k) Plans The Matching Test System was not designed for use by 401(k) plans, but since contributory 401(k) plans are generally subject to the Matching Test, they can use it for that purpose. It is also possible to conduct the Average Deferral Percentage (ADP) test for 401(k) plans using this software, if certain adjustments are made (see page 36 of this manual). 4 A guide to the TIAA matching test software
Obtaining and installing the software Version 3.1 of the TIAA Matching Test System Software will generally operate on any computer operating on Windows. It is available via an Internet download from TIAA onto your computer. If you have not already downloaded the 401(m) Matching Test Software, you can access it by following these instructions: 1. Go to TIAA.org Plan Sponsor site, and select Log in. 2. Once you’ve logged in, select the Compliance tab.
If you have questions, please contact the TIAA Administrator Telephone Center at 888-842-7782, weekdays, 8 a.m. to 8 p.m. (ET).
3. From the Compliance landing page click on the 401(m) Matching Test Software section.
4. From the 401(m) Matching Test page you can view the software guide by selecting the download the Matching Test Software Guide link. Finally, you can download the software by reading the Terms and Conditions, checking I agree and selecting the Download button.
A guide to the TIAA Matching Test software
5
The Matching Test workspace includes a number of options that you can use to maintain your plan information. WW
Starting and exiting the program
WW
Exploring the user interface
WW
Menus
WW
Toolbars
WW
Status bar
6 A guide to the TIAA Matching Test software
I. Getting to know the program Starting and exiting the program The first time you start the Matching Test System, the program displays the Plan Configuration dialog. This dialog lets you enter the name of your institution in addition to default plan information. You can change this information at any time by choosing the Tools > Plan Configuration menu command on the menu bar at the top of the screen. For more information, see Plan Configuration Settings on page 20 of this guide. To start the Matching Test: WW
If you chose to place the Match Test icon on your desktop during installation, you can start the program by double-clicking this icon.
WW
If you chose not to place the Match Test icon on your desktop and installed the software in the default directory, start the program by clicking the Start button and choosing Programs > TIAA > Match Test.
Note: If you have entered or modified any data since your last save, you will be asked if you want to save the updates before closing the program.
To exit the Matching Test: WW
Click the close button in the upper right-hand corner of the program window, or
WW
Click the Match Test icon in the upper left-hand corner of the title bar and choose close.
A guide to the TIAA Matching Test software
7
Exploring the user interface The Matching Test can generally be conducted using either the Current Year Testing Method or the Prior Year Testing method (i.e., using current or prior year salary and contribution data for purposes of calculating Average Contribution Percentages (ACPs) for non-highly compensated employees (NHCs)). The testing method that you use should be specified in your plan document, but in practice, most plans using this software use the current year testing method, because they have always used that method.
Current year testing method If the plan sponsor elects to test using the Current Year Testing Method, as most administrators using this software do, then contribution percentages for both highly and non-highly compensated employees (HCs and NHCs) are calculated based on salary and contribution data for the plan year for which the test is being conducted and the determination of who is an HC is based on compensation earned in the prior plan year. For example, when conducting the Matching Test for the 2015 plan year using the current year testing method, contribution percentages for both HCs and NHCs are calculated using 2015 compensation and
8 A guide to the TIAA Matching Test software
contribution data and the determination of who is a highly compensated employee is based on 2014 compensation. You are not asked to enter prior year compensation in the system for purposes of determining which employees qualify as highly compensated; however, you will want to review the HC/NHC status of employees which the system calculates based on current year data to ensure that their HC/NHC status would not have been different if prior year compensation was used to determine their status. You can manually change any employee’s HC/NHC status if necessary.
Prior year testing method If your plan document requires using the Prior Year Testing Method, then contribution percentages for non-highly compensated employees are calculated based on salary and contribution data for the plan year prior to the year for which the test is being conducted. Contribution percentages for highly compensated employees are calculated based on salary and contribution data for the plan year for which the test is being conducted. The determination of who is a highly compensated employee is based on compensation earned in the plan year prior to the plan year for which the test is being conducted. In other words, when conducting the Matching Test for the 2015 plan year using the prior year testing method, while contribution percentages for HCs are calculated using 2015 compensation and contribution data, contribution percentages for NHCs are calculated using 2014 compensation and contribution data and the determination of who is a highly compensated employee is based on 2014 compensation. Since you are not asked to enter prior year compensation in the system for purposes of determining which employees qualify as highly compensated, however, you will want to review the HC/NHC status of employees which the system calculates based on current year data to ensure that their HC/NHC status would not have been different if prior year compensation was used to determine status. You can manually change any employee’s HC/NHC status if necessary.
Even if you elect to conduct the Matching Test using the prior year testing method, you must still enter current year data for both HCs and NHCs on the system. If you elect to use the prior year testing method, you will need to indicate that you wish to use prior year information on the Plan Configuration screen in the Tools menu and indicate the location of the prior year data file in the Current Plan Profile screen in the Tools menu. For the first plan year in which you are going to conduct the Matching Test using the prior year method, you will need to first conduct the test for the immediately preceding plan year using the current year testing method in order to create the prior year data file you need to conduct testing for the current year using the prior year testing method. You will need to indicate that you do NOT wish to use prior year information on the Plan Configuration screen in the Tools menu before doing testing for the prior year using the current year testing method. Then, when you get ready to conduct the test for the current year using the prior year testing method, you will have go back to the Plan Configuration screen in the Tools menu to indicate that you now DO want to use prior year information for the Matching Test.
A guide to the TIAA Matching Test software
9
Menus The menu bar displays commands for performing tasks. Menus are organized by topic. For example, the File menu contains commands for working with individual documents.
File menu commands
Edit menu commands
The File menu offers the following commands:
The Edit menu offers the following commands:
New Creates a new employee data file.
Copy Copies data from the Matching Test employee data file to the clipboard.
Open Opens an existing employee data file. Save Saves the open data file using the current file name. Save As Saves the open data file using a new file name that you specify. Import Imports payroll data from an external text file. Results View results of the Matching Test. Exit Exits TIAA Matching Test System.
Tool menu commands The Tools menu offers the following commands: Current Plan Profile Modify the testing parameters for the current plan year (plan year, HC amount, etc.). Plan Configuration Set or modify default testing parameters, which will be used to determine HC and includable compensation amounts and testing method, unless you indicate different amounts for the current plan year on the Current Plan Profile.
10 A guide to the TIAA Matching Test software
Paste Pastes data from the clipboard into the Matching Test employee data file. Select All Selects all of the employees’ profiles for copying to the clipboard. Find Locate an employee in the Matching Test database by either their First or Last Name.
Help menu commands The Help menu offers the following commands, which provide you assistance with this application: Help Topics Offers you an index to topics on which you can get help. About Displays the version number of the Matching Test software. License Agreement Displays the license agreement that governs the use of the Matching Test software.
Toolbar The toolbar is displayed across the top of the application window, below the menu bar. The toolbar provides quick mouse access to many tools used in the application. The toolbar offers the following commands:
New
Create new blank Matching Test database document
Edit
Edit the highlighted employee’s profile
Open
Open an existing Matching Test database document
Delete
Delete the highlighted employee or employees profiles
Save
Save the open Matching Test database document
Results
View the results of the Matching Test for the open database file
Copy
Copy the open Matching Test database to clipboard
About
Displays information about the program: version number and copyright
Paste
Paste employee data from the clipboard into the open database document
Help
Add
Add an employee to the open Matching Test database
Transforms cursor to a Help Arrow. Get information about a screen item by using the Help Arrow to click on that item on the screen
Status bar
The status bar is displayed at the bottom of the application window and is divided into five (5) panels. The first panel describes actions of menu items as you use the arrow keys to navigate through menus. This area similarly shows messages that describe the actions of toolbar buttons as you press them, before releasing them. If after viewing the description of the toolbar button command you wish not to execute the command, then release the mouse button while the pointer is off the toolbar button.
The remaining four (4) panels provide information on the plan profile for the currently opened document. I. Total Number of Employee Profiles II. Number of Highly Compensated Employees III. Number of Non-Highly Compensated Employees IV. Status of the Matching Test
A guide to the TIAA Matching Test software 11
Dialogs are windows that open when you choose certain commands in the Matching Test System. Use them to select and preview command options. WW
Importing employees
WW
Current plan profile
WW
Plan configuration
12 A guide to the TIAA Matching Test software
II. Working with dialogs Import command (file menu) There are two methods available for importing employee data into the application. Once you’ve imported the data, immediately save it before making any changes. This will avoid the need to reimport it should you run into problems. The following is a brief description of each field that may be imported and its allowable contents. Field name explanation About Displays the version number of the Matching Test software. ID Number You may use the employee’s Social Security number or any other unique identifier. First/Last Name You may place anything in these fields or leave them blank. However, keep in mind that names are useful for searching employee records in the system later on. If a name is not entered, then the PC file must contain ID numbers. Total Compensation Enter the employee’s total compensation for the plan year. Generally this amount should equal either: (1) unadjusted box 5 W-2 wages or (2) box 1 W-2 wages plus any salary reduction contributions the employee makes to a retirement [§403(b) or 401(k)] plan, cafeteria [§125] plan, cash or deferred [§401(k)] arrangement, simplified employee pension [§402(h)] plan, or eligible deferred compensation [§457] plan. For more information on compensation, refer to Keeping Your Plan In Shape, your TIAA nondiscrimination testing guide, available on the TIAA Administrator Web Center in the 403(b) Resource section at TIAA.org/administrator.
Employer Matching Contribution Enter the dollar amount contributed to the retirement plan for this employee by the employer during the plan year. Enter zeros for this field, if the employee is eligible for the plan but no employer matching contribution is made during the plan year. Employee After-Tax Contribution Enter the dollar amount contributed to the retirement plan by this employee via salary deduction. Enter zeros for this field, if participant didn’t make any contributions during the plan year or if their contributions were pretax salary reduction or Roth 403(b) contributions. Highly Compensated Indication as to whether the employee is highly compensated or not (HC or NHC).
A guide to the TIAA Matching Test software 13
Method 1. Importing employee data from an Excel worksheet To import employee data from an Excel workbook into the Matching Test System database, highlight the information in Excel and copy the information to the clipboard. Once the information has been copied to the clipboard, it can be pasted into the Matching Test application. Importing data using this method requires that the fields in the Excel workbook be in the same order as the Matching Test system. So if the sequence of the fields is different in the original
14 A guide to the TIAA matching test software
Excel workbook than required by the Matching Test system, create a new Excel file with the data fields in the required sequence before attempting to import. It is not necessary to have data for all of the fields in the Excel worksheet in order to import data into the Matching Test, but the Excel file must at least contain ID numbers. If compensation amounts are to be imported, the Excel file must contain IDs and first and last names so that data will be imported into the correct field.
Method 2. Importing employee data from a text file To import the data from a text file into the database, choose the File > Import menu command. Using this method enables the input of employee and contribution data for each employee by importing the necessary data from a text file created from an existing mainframe or PC employee database. It is suggested that you consult your institution’s PC support staff for help in creating the import file. Each record in the text file must contain data for one employee. Each employee should have only one record containing an ID number and/or name and possibly total compensation, employer matching contribution and employee after-tax contribution. The location information for a field can be left blank if the predefined field does not exist in the import data file.
In order to import the employee profiles, you will first be required to specify the name of the file as well as the file format. Depending on the format specified, one of the following screens will be displayed.
A guide to the TIAA Matching Test software 15
Comma delimited (CSV) format Any ASCII text file with comma-separated fields may be imported. Here is a sample record for one employee: 12, Dean, Williams, 20000.56, 1000.51, 0
Fixed format Any ASCII text file with fixed length records may be imported. Here is a sample record for one employee: 1 Dean Williams 20000.56 1000.51 0
16 A guide to the TIAA matching test software
Current plan profile command (tools menu) The profile to be used for testing the current database is available for viewing or editing at any time by choosing the Tools > Current Plan Profile menu command. After choosing this option, you will be presented with one of the following dialogs depending on whether or not you checked the Use Prior Year Information for Matching Test box in the Tools > Plan Configuration dialog.
Current year testing method:
Prior year testing method:
The following information should then be entered for the plan profile: WW
Plan year
WW
Definition of highly compensated employee amount
WW
Limit on includable compensation
WW
Prior year comparison file (if the prior year testing method is used)
OK Button Pressing this button saves any pending updates to the profile and exits the dialog. Cancel Button Pressing this button cancels any pending updates to the profile and exits the dialog.
A guide to the TIAA Matching Test software 17
Plan configuration command (tools menu) The plan configuration is available at any time by choosing the Tools > Plan Configuration menu command. After choosing this option, you will be presented with the following dialog.
The following information should then be entered for the plan configuration: WW
Institution Name
WW
Definition of Highly Compensated Employee Amount
WW
Limit on includable Compensation
WW
Automatically determine HC/NHC Status
WW
Use prior year information for Matching Test (if prior year testing method is being used)
Institution name Generally you should enter the name of the employer that sponsors the retirement plan you are testing on the Plan Configuration dialog when you first load the Matching Test System on your computer. This name appears on the system dialogs and also on any printouts you generate. If you did not enter the institution name when you first installed the application, you can still enter it later by clicking on the Tools menu and then Plan Configuration.
18 A guide to the TIAA matching test software
Definition of highly compensated employee amount Nondiscrimination testing, including the Matching Test performed by this software, is designed to prevent Highly Compensated Employees (HCs) from receiving retirement plan contributions (or benefits) that are disproportionately high compared to those received by Non-Highly Compensated Employees (NHCs). This software automatically determines who is an HC or NHC by comparing their total compensation for the current plan year with the highly compensated employee amount for the current plan year if you check the automatically determine HC box on Plan Configuration. IRS regulations require that the determination of who is an HC be made on the basis of total compensation for the year prior to the plan year for which testing is being conducted. Generally employees must be classified as HCs if they received total compensation over $80,000 (indexed) in the prior year.
You can also obtain the highly compensated employee amount for other plan years or obtain more information on the application of the rules by calling TIAA’s Administrator Telephone Center at 888-842-7782.
In order to adjust for differences between current compensation used by the software to determine HC status and prior year compensation that IRS regulations require to be used, you should override the software’s automatic classification of any employee as an HC or NHC on the basis of their current year compensation if, according to your records, their compensation in the prior year would place them in the other HC/NHC category. In most cases, employees who are highly compensated in one year were also highly compensated in the prior year, so usually few adjustments are required to the automatically determined HC/NHC status. The table below lists the HC amounts that should be inserted when conducting nondiscrimination testing for various plan years. Please note that the amounts listed for each plan year are actually the amounts of prior year compensation that qualifies an employee as an HC for the current plan year. Plan year
Highly compensated employee amount
2011
$110,000
2012
$110,000
2013
$115,000
2014
$115,000
2015
$115,000
2016
$120,000
Note: When creating a new employee database document, the system will use this value from the Plan Configuration dialog as the default for the value on the Current Plan Profile dialog. If you want to use a different value for the current plan year, you will need to change the value on Plan Configuration dialog or enter a new value on the Current Plan Profile dialog.
A guide to the TIAA Matching Test software 19
Limit on includable compensation You can also obtain the highly compensated employee amount for other plan years or more information on the application of the rules by calling TIAA’s Administrator Telephone Center at 888-842-7782.
The tax law places a limit on the maximum amount of an individual’s compensation that can be taken into account for purposes of calculating retirement plan contributions and nondiscrimination testing. The software places no limit on the amount of total compensation that can be imported or manually entered for an employee. But the software does limit the maximum amount of compensation that it actually takes into account when calculating an employee’s contribution percentage. For example, if a plan had a 10% contribution rate and the includable compensation amount for the plan year being tested was $265,000, then the contribution for an employee with compensation of $300,000 would be $26,500 (10% of the includable compensation amount) and the software will calculate the employee’s contribution percentage using the includable compensation amount. You determine the maximum amount the software uses by entering the limit on includable compensation that applies to the plan year for which you are conducting the test. Plan year
includable compensation limit
2011
$245,000
2012
$250,000
2013
$255,000
2014
$260,000
2015
$265,000
2016
$265,000
Note: When creating a new employee database document, the system will use this value from the Plan Configuration dialog as the default for the value on the Current Plan Profile dialog. If you want to use a different value for the current plan year, you will need to change the value on Plan Configuration dialog or enter a new value on the Current Plan Profile dialog.
20 A guide to the TIAA matching test software
Automatically determine HC/NHC status If you activate this option to automatically determine who is highly compensated, the software will determine who is HC or NHC by comparing employees’ total compensation for the current plan year with the Highly Compensated Employee Amount that you entered on the Current Plan Profile dialog. In order to adjust for differences between current compensation used by the software and prior year compensation that IRS regulations require to be used, you should override the software’s automatic classification of any employee as an HC or NHC on the basis of their current year compensation if, according to your records, their compensation in the prior year would place them in the other HC/NHC category. In most cases, employees who are highly compensated in one year were also highly compensated in the prior year so usually few adjustments are required to the automatically determined HC/NHC status. The table on page 21 of this guide lists the HC amounts that should be inserted when conducting nondiscrimination testing for various plan years.
Use prior year information for Matching Test The Matching Test can generally be conducted using either the Current Year Testing Method or the Prior Year Testing Method [i.e., using either current or prior year salary and contribution data for purposes of calculating Average Contribution Percentages (ACPs) for non-highly compensated employees (NHCs)]. If the plan document specifies that the test be performed using prior year data, then contribution percentages for NHCs are calculated based on salary and contribution data for the plan year prior to the year for which the test is being conducted. Contribution percentages for highly compensated employees (HCs) are calculated based on salary and contribution data for the plan year for which the test is being conducted. Even if you elect to conduct the Matching Test using the prior year testing method, you will enter current year data for both HCs and NHCs on the system. If you elect to use the prior year testing method, however, you will be asked to provide the name of the file containing data for the prior plan year. Before you use the prior year testing method for the first time you will first have to conduct the test for the immediately prior year using the current year testing method so as to provide the necessary data for conducting the test for the current plan year using the prior year testing method. OK Button Pressing this button saves any pending updates to the configuration and exits the dialog. Cancel Button Pressing this button cancels any pending updates to the configuration and exits the dialog.
A guide to the TIAA Matching Test software 21
Modifying the plan WW
Add an employee
WW
Modify an employee
WW
Delete an employee
WW
Highly compensated status
Note: The application automatically recalculates the results of the Matching Test any time a change is made. A summary of the results is shown in the status bar.
Adding an employee to the software database Either the Add button on the toolbar or the Insert key on the keyboard, enable you to insert a new employee profile into the Matching Test database. After you click the Add button or press the Insert key, you will be presented with this dialog:
The following information should then be entered for each employee eligible for the plan: Employee ID The Employee ID can be used to identify employees on the system’s database. ID numbers can either be imported or manually entered in the system. Each employee file must have either an ID number, a name, or both. No two employees can have the same ID number. If desired, IDs can include letters and/or symbols as well as numbers. If your IDs consist exclusively of numbers, and you want to be able to sort employee profiles by ID, you should use the same number of digits for each employee. (For example, if more than 100 employees are eligible for the plan and you are simply assigning consecutive numbers to each employee as you enter them into the system, then employees should receive ID numbers such as 002, 034, and 237.) First and Last Name Employee names can be used to identify and search for employees on the system’s database. Names can either be imported or manually entered in the system. The system will accommodate more than one employee with the same name, but if ID numbers are entered in the system for employees with the same name, they should have different ID numbers. Total Compensation You must apply the same definition of compensation to all employees for nondiscrimination testing. For purposes of this software, you should generally use an employee’s box 5 W-2 compensation without adjustment. As an alternative to using the box 5 amount, you can use an employee’s box 1 W-2 compensation, plus most salary reduction contributions, including those to:
22 A guide to the TIAA matching test software
WW
403(b) retirement and supplemental retirement plans
WW
Cafeteria plans
WW
401(k) plans
WW
Simplified employee pension plans (SEPs)
WW
Section 457 eligible deferred compensation plans
If an employee is only eligible for the plan for a portion of the plan year being tested, compensation for only the period he or she was eligible can be entered on the system, as long as part-year compensation is consistently used for all employees who become eligible in mid-year. Of course the determination of whether or not an employee is highly compensated is always based on total compensation for the entire plan year prior to the one for which the test is being run. If the employee was hired in the prior year, he or she will be treated as non-highly compensated when conducting the Matching Test for the current year if he or she earned less than the highly compensated amount in the prior year, even if his or her annual salary was higher.
Highly Compensated Nondiscrimination testing, including the Matching Test performed by this software, is designed to prevent Highly Compensated Employees (HCs) from receiving retirement plan contributions (or benefits) that are disproportionately high compared to those received by Non-Highly Compensated employees (NHCs).
For more information on compensation for testing purposes, see the definition of compensation in TIAA’s nondiscrimination testing guide, Keeping Your Plan In Shape.
OK Button Pressing this button saves any pending updates to this employee and exits the dialog.
Employer Contribution For purposes of this software, employer contributions generally include only employer contributions made to match employee contributions to the plan.
For more information on HC determinations, see page 21 of this manual. Add New Button Press this button, if you wish to save the information and remain on this dialog so that you may add another employee profile.
Cancel Button Pressing this button cancels any pending updates to this employee and exits the dialog.
Qualified Non-elective Contributions (QNCs) may also be voluntarily included with other employer contributions for testing purposes if the QNCs otherwise satisfy General Nondiscrimination requirements on their own. These contributions must be entered on the system so that the software can count them when performing the Matching Test. Refer to the entry in the Key Definitions section of this guide or TIAA’s nondiscrimination testing guide, Keeping Your Plan In Shape, for more information on QNCs. Employee After-Tax Contribution If the contributory plan being tested allows employees to make after-tax (salary deduction) contributions to the plan, these contributions are also subject to the Matching Test along with employer matching contributions and must be entered in the system so that the software can count them when performing the Matching Test. Employee pre-tax salary reduction contributions or Roth 403(b) contributions should never be aggregated with after-tax contributions. (If you are using the Matching Test System to perform the ADP Test for a 401(k) plan, however, only pre-tax employee contributions and Roth 401(k) contributions should be entered in this category and employer matching contributions should not be entered into the data base for this test.)
A guide to the TIAA Matching Test software 23
Edit an employee Either clicking on the Edit button on the toolbar or double-clicking on a specific employee in the system’s employee database, will enable you to edit an existing employee profile from the Matching Test database. After you click the Edit button or double-click the employee profile, you will be presented with the following dialog.
The following information can then be updated for the employee: WW
Employee ID
WW
First name
WW
Last name
WW
Total compensation
WW
Employer contribution
WW
Employee after-tax contribution
WW
Highly compensated
OK Button Pressing this button saves any pending updates to this employee and exits the dialog. Cancel Button Pressing this button cancels any pending updates to this employee and exits the dialog.
24 A guide to the TIAA matching test software
Delete an employee Either the Delete button on the toolbar or the Delete key on the keyboard enable you to delete selected employee profile(s) from the Matching Test database. After locating and highlighting the profile(s) you want to delete, you must click the Delete button or press the Delete key. You will then be asked to confirm that you want the selected employee profile(s) to be deleted from the database.
Highly compensated status To change the HC/NHC compensation status of a number of employees, you have the option of either editing each employee individually, or selecting all of the employees to be modified and choosing the new status from the context menu. To display the context menu, right-click the mouse on one of the selected employee profiles. Then, left click on the desired HC or NHC status in the context menu box.
A guide to the TIAA Matching Test software 25
Results command (File menu) Note: The majority of this information is not displayed on the program’s screen, and is only shown when the report is printed.
The option to view and/or print the results of the Matching Test is available at any time by choosing the File > Results menu command. While viewing the test results report, you may choose to print the report at any time by clicking on the Print icon. The “Standard Report” shows the following information: WW
Whether or not your plan passed the test
WW
The average contribution percentage (ACP) for the current year for both NHCs and HCs
WW
The average contribution percentage for the prior year for both NHCs and HCs (if using prior year testing)
WW
The date on which you conducted the test
WW
The HC definition amount and includable compensation amount you used
WW
The plan year tested
WW
Whether you elected to use current or prior year testing method and thus prior year data for NHCs
WW
The details of each employee’s compensation, contributions and HC/NHC status
If you are using the current year testing method, the software automatically calculates the ACPs, by first calculating a contribution percentage for each eligible employee by dividing their employer matching contributions and employee after-tax contributions by their total compensation using data for the current plan year. The ACPs for NHCs (or HCs) are then calculated by dividing the sum of the contribution percentages for all the NHCs (or HCs) by the number of eligible NHCs (or HCs). If you elected to test using the prior year testing method (i.e., using prior year data for NHCs), you will be asked to supply the name of the file that contains the prior year data. Before you use the prior year testing method for the first time you will first have to conduct the test for the immediately prior year using the current year testing method so as to provide the necessary data for conducting the test using the prior year testing method. The system will then use the ACP from the prior year for your NHCs when you conduct the test for the current year using the prior year testing method. The software automatically calculates the ACP for HCs, by first calculating a contribution percentage for each eligible HC by dividing their employer matching contributions and employee after-tax contributions by their total compensation using data for the current plan year. The ACP for HCs is then calculated by dividing the sum of the contribution percentages for all the HCs by the number of eligible HCs. Generally, once you elect to perform the Matching Test using the current year testing method (i.e., using current year data to calculate the ACP for your NHCs), you cannot switch to using the prior year testing method to calculate the ACP for your NHCs in future plan years unless the current year method was used in the preceding five years. There is no limitation on changing from the prior year testing method to the current year method.
26 A guide to the TIAA matching test software
Passing the test If your plan passes the test, you will be able to view and print the Standard Report for your files. No further action is required and you don’t need to forward the report to anyone.
A guide to the TIAA Matching Test software 27
Failing the test If your plan fails the test, while viewing the Standard Report you will be provided with options for correcting this failure. If you tested using the current year testing method, the system will first calculate the amount of Qualified Non-elective Contributions (QNCs) that the employer must make for each non-highly compensated employee participating in the plan in order to meet nondiscrimination requirements. (Note that QNCs must be contributed within 12 months of the end of the plan year for which they are allocated.) The system will then calculate the amount of contributions that must be refunded to each highly compensated employee in order to meet nondiscrimination requirements if the employer elects not to make QNCs. If you tested using the prior year testing method, the system will calculate the amount of contributions that must be refunded to each highly compensated employee in order to meet nondiscrimination requirements. But the system will not calculate the amount of QNCs that could be made to NHCs as an alternative to refunding excess aggregate contributions to HCs, because you generally cannot use QNCs if you tested using the prior year testing method. (QNCs must be made before the end of the plan year for which the test is being conducted if the prior year testing method is used, so QNCs could not be used unless the test was performed and the QNCs made before the end of the plan year for which the test is being performed).
28 A guide to the TIAA matching test software
A guide to the TIAA Matching Test software 29
As an alternative to refunds or QNCs, you might want to consider retesting after changing your testing method from current year testing to prior year testing or vice versa, by changing your response to the “Use prior year information” box on the Plan Configuration screen. Remember, however,
30 A guide to the TIAA matching test software
that the testing method should be specified in your plan document and switching from the current method to the prior method is permitted only if the current year method was used for at least five years (if the plan has been in existence that long).
Refunding excess aggregate contributions If Excess Aggregate Contributions need to be refunded to correct a failure of the Matching Test, IRS Regulations require that these amounts, adjusted for earnings, be distributed to the highly compensated employees affected within 2½-months following the end of the plan year to avoid the 10% employer excise tax. For calendar year plans, this deadline is March 15. If distributed after the 2½-month deadline, an excise tax of 10% of the excess contributions distributed (but not the earnings on the contributions) will be imposed on the employer under IRC Section 4979. However, if one of the other methods for correcting the failure is used (e.g., making additional contributions for NHCs), no excise tax is imposed even if that is done after the close of the 2½-month period. However, if the failure is not corrected by refunds or other acceptable method by the end of the plan year following the year in which excess contributions were made (e.g., December 31, 2016 for 2015 calendar year plans), the plan could lose its tax-favored status. TIAA will help employers comply with the regulations by making these refunds to HCs if the employer requests it. Although Excess Aggregate Contribution amounts can be determined only by the employer, we will use the information you provide to process the refund amounts, adjusted for earnings. We will need the following information for each affected highly compensated employee: WW
Plan number
WW
Name
WW
Social Security number
WW
Contract number(s)
WW
Amount of excess aggregate contributions
WW
Source of the refund (i.e., employer matching contributions and/or employee salary deduction contributions).
If the source of the refund is not indicated, we will assume that it is employer retirement plan contributions. If you indicate that the refund should include both employer and employee contributions, we will satisfy the request by first refunding the employer contributions and then making any additional refunds required from employee contributions. If you would like to submit this information to us electronically through file exchange, please provide this data to us based on the enclosed format (see Exhibit A) in the order shown. If refunds are required for more than fifty individuals, and your institution has the ability, it would be preferable to provide the data electronically. The file should be formatted as shown in Exhibit A (on page 35) and should also indicate the total number of individuals affected and the total dollar amount of the excess contributions to be refunded. Please include the name and telephone number of a contact person in case we experience a problem with the file. Also, please indicate the name of your institution along with the word “REAC” in the comments field. Since the data that you send us will be used to process the refunds, its format, accuracy and completeness are critical for proper processing. Due to the possible large number of requests, we must receive this data no later than February 15 in order to comply with the March 15 deadline. The earlier you return the information, the sooner we can process the refunds. The information should be sent to: TIAA 8500 Andrew Carnegie Blvd. Charlotte, NC 28262
If you have any questions or need assistance in gathering the data, please contact the TIAA Administrator Telephone Center at 888-842-7782.
A guide to the TIAA Matching Test software 31
Refunds will be made by TIAA directly to the employees concerned, followed by a Form 1099-R which will provide the necessary tax reporting information. In most cases, refunds will represent excess employer contributions, and the employee will not need to report the refund as income until filing a tax return for the year of the distribution. TIAA will send IRS Form 1099-R to these employees. Any refunds that represent employee after-tax contributions will be reported but only the earnings will be taxable. If refunds are processed after the close of the 2½-month period, employees due refunds will be sent a Withholding Option Form to determine how much taxes are withheld from their refunds. If TIAA does not get a completed form back within 15 days, 10% will automatically be withheld from the employee’s refund. The Form 1099-R will of course indicate the amount of taxes withheld, if any. Any refunds processed more than 2½ months after the end of the plan year will be taxable in the year distributed regardless of the amount.
32 A guide to the TIAA matching test software
Exhibit A. Print report format requirements If it is not possible to submit a file electronically of the requested data as indicated below, a printed report must be submitted in the exact format as the sample shown below. Column
Glossary of terms
(1)
Plan Number
(2)
Social Security Number—Must be nine digits
(3)
TIAA Contract Number—Must be eight digits
(4)
Total amount of excess premium contributions—Must be numeric and use two digits after the decimal
(5)
Type of Premium Contributions to be refunded—Please use one of the following codes: I = Employer Contributions only or B = Both Employer Contributions and Employee Salary Deduction Contributions
(6)
Participant name—Please provide the information in the following order: Last name, First name, Middle initial
Please direct all questions to the Administrator Telephone Center at 888-842-7782, weekdays, 8 a.m. to 8 p.m. (ET).
Report format requirements (1)
(2)
(3)
(4)
(5)
(6)
Plan number
SS NBR
CONT NBR
Excess Prem Amt
TP
Participant name
123
123-45-6789
B1234567
$1,234.00
B
Smith John D
Totals
Number of records)
(Excess premium amount)
All reports should be directed to: Standard Mail: TIAA POB 1268 Charlotte, NC 28201-1268 Overnight: TIAA 8500 Andrew Carnegie Blvd Charlotte, NC 28262 Fax: 800-842-5916 Please do not address the envelope or fax to a specific TIAA associate or employee. This will delay the processing of your request.
A guide to the TIAA Matching Test software 33
Index command (Help menu) Use this command to display the opening screen of help. From the opening screen, you can jump to step-by-step instructions for using the Matching Test and various types of reference information.
WW
If the plan fails the ADP test, and the failure is corrected by refunding excess deferrals to highly compensated employees, any matching employer contributions attributable to refunded elective deferrals must be forfeited.
WW
Print out the failing results of the ADP test and save the data file. Note that the amount of employer matching and employee after-tax contributions that the Standard Report says must be refunded will actually be the amount of pre-tax employee deferrals and Roth 401(k) contributions to be refunded to correct failure of the ADP Test. Save the data file using a different name than the one used for Matching Test data for the same plan year.
Once you open Help, you can click the Contents button whenever you want to return to the opening screen.
Testing 401(k) Plans The Matching Test System was not designed for use by 401(k) plans, but since contributory 401(k) plans are generally subject to the Matching Test, they can use it for that purpose. It is also possible to conduct the Average Deferral Percentage (ADP) test for 401(k) plans using this software, if certain adjustments are made:
Run the ADP test before running the Matching Test on the 401(k) Plan: WW
When conducting the ADP test, data for all employees eligible to make voluntary contributions to the plan should be included, even if they have not yet satisfied a waiting period to qualify for matching employer contributions.
WW
Employer matching contributions and employee after-tax contributions should not be included in the database.
WW
Employee pre-tax and Roth 401(k) contributions (which are excluded when conducting the Matching Test) should be included in the employee after-tax column.
WW
If the plan passes the test, print out the test results and include a memo indicating that the results are for the ADP Test not the Matching Test.
34 A guide to the TIAA matching test software
Conduct the Matching Test on the 401(k) Plan: WW
When conducting the Matching Test, exclude any employees not eligible for the employer match, even if they are eligible to make voluntary employee contributions.
WW
Include the amount of employer matching contributions and after-tax employee contributions (if any). The amount of employer matching contributions included in the data base for highly compensated employees should be the net amount of matching contributions after taking into account the amounts forfeited (if any) to correct failure of the ADP Test.
WW
Do not include the pre-tax salary deferrals and Roth 401(k) contributions that were included when conducting the ADP Test on the 401(k) plan.
WW
Print out the results of the Matching Test and save the data file using a different name than the one that was used for the ADP Test for the same plan year.
Minimum coverage test
General nondiscrimination test
In addition to the Matching Test, plans must also meet Minimum Coverage requirements in order to satisfy nondiscrimination requirements. If at least 70% of the plan sponsor’s non-highly compensated employees (NHCs) are eligible to receive matching employer contributions if they make voluntary employee contributions to the plan, then the plan automatically satisfies Minimum Coverage requirements by passing the Ratio-Percentage Test. If less than 70% of NHCs are eligible to receive matching employer contributions if they make voluntary employee contributions to the plan, then the plan will still satisfy the Ratio-Percentage Test if at least 70% of the nonexcludable NHCs are eligible for matching contributions. (Excludable employees are generally those who have not satisfied the plan’s minimum age and service requirements as long as none of these employees are in fact eligible for employer matching contributions.) If the plan does not satisfy these requirements, it may still be able to satisfy minimum coverage requirements by excluding certain other categories of employees or by using an alternative Minimum Coverage Test referred to as the Average Benefit Test. See Keeping Your Plan In Shape, TIAA’s nondiscrimination testing guide, for more information on the Minimum Coverage Test. (Keeping Your Plan In Shape can be downloaded from TIAA’s Administrator Web Center on the 403(b) Resource section at TIAA.org/administrator.)
In addition to meeting Minimum Coverage and Matching Test requirements, plans must also satisfy additional General Nondiscrimination requirements. To pass this test, contributory plans must not discriminate in favor of Highly Compensated Employees over Non-Highly Compensated Employees with respect to availability of other benefits, rights and features (e.g., payout, investment, transfer or loan features). If a contributory 403(b) plan passes the Matching Test, satisfies Minimum Coverage requirements, and all employees eligible for the plan are eligible for exactly the same payout, investment, transfer and loan features, the plan will generally satisfy General Nondiscrimination requirements without further testing. See Keeping Your Plan In Shape, TIAA’s nondiscrimination testing guide, which can be ordered from TIAA’s Administrator Telephone Center Help Desk at 888-842-7782, for more information on the General Nondiscrimination Test.
If a contributory plan is age-or service-graded, or otherwise provides different levels of matching contributions to different categories of employees or requires different levels of employee contributions for various categories of employees, each contribution level of the plan will have to be treated as a benefit, right or feature in plan years beginning on or after January 1, 2009 due to the final 403(b) regulations, and will have to be tested for nondiscriminatory availability.
A guide to the TIAA Matching Test software 35
36 A guide to the TIAA Matching Test software
III. Key definitions Automatic enrollment safe harbors
Church plan
In plans with automatic enrollment (also known as negative election), all employees eligible for the elective deferral plan are automatically enrolled in the plan at a specified contribution rate with contributions going into a default investment option selected by the plan sponsor. An employee can subsequently make an election to not participate in the plan, to contribute a different percentage of compensation and/or to transfer funds or change future contribution allocations from the default investment option to other investment options offered under the plan.
If a “steeple church” or a qualified church-controlled organization is the employer sponsoring a retirement plan, the plan doesn’t have to meet any nondiscrimination requirements. If an educational institution is not separately incorporated from its controlling church, it qualifies as a church and its plan(s) are church plan(s) provided the school is not subject to FICA tax withholding under IRC Section 3121. In addition, a primary or secondary school, even if separately incorporated, generally qualifies as a church as long as it is “controlled,” operated, or principally supported by a church. The church may be local, regional, or national.
Typically automatic enrollment requires employees to have a predetermined percentage of their pay (usually 3%) deferred to the plan as soon as they become eligible to participate, unless the employee affirmatively elects otherwise. Employers who add an Auto Enroll feature to a pre-existing elective deferral plan often apply automatic enrollment only to new hires. Many sponsors of contributory 403(b) plans that add auto enroll to their plans do so because they have been having difficulty passing the Matching Test. Automatic enrollment will often increase participation by NHCs, but it does not guarantee passing the Matching Test. Thanks to the Pension Protection Act of 2006, however, auto enroll plans that meet safe harbor requirements (which include auto enrolling all employees eligible for the plan and not just new hires) automatically satisfy Matching Test requirements without having to conduct the Matching Test (see section V of Keeping Your Plan In Shape for details.)
For a separately incorporated school, which is not a primary or secondary school, such as a college or university, it is very difficult to qualify as a church or “qualified church-controlled organization,” as the law defines it. To do so, two criteria must be met. First, its services (generally education) must be offered at a “nominal charge” which is “substantially less” than the cost of providing such services. Second, less than 25 percent of its budget may come from either government sources or the performance of services, sale of merchandise, or receipts from admissions. So, for example, tuition, government grants and aid, and bookstore profits may not equal as much as 25 percent of a college’s budget if its retirement plan is be exempted from nondiscrimination testing as a church plan. If, however, a plan is sponsored not by the college or university, but by the church it is affiliated with, that plan is exempt from the nondiscrimination rules.
Average contributions percentage
Contributory plan
In order to pass the Matching Test, the Average Contribution Percentage (ACP) for eligible Highly Compensated Employees (HCs) can’t exceed the following limits:
A contributory or “matching” plan is one that requires employee contributions as a condition of receiving employer contributions. These plans are generally subject to the Matching Test. If participation in a plan is required of employees as a condition of employment or if all employee contributions are made under one-time, irrevocable salary reduction agreements, the plan is treated as a noncontributory plan and thus is not subject to the Matching Test.
WW
Two times the ACP for eligible Non-Highly Compensated Employees (NHCs) if the NHCs’ ACP is not more than 2%
WW
The NHCs’ ACP plus 2%, if the NHCs’ ACP is more that 2% but not more than 8%
WW
The NHCs’ ACP times 1.25 if the NHCs’ ACP is more that 8%
A guide to the TIAA Matching Test software 37
Design-based safe harbors
Eligible employees
As the name implies, a safe harbor is a haven from a sea of calculations. Usually, by adopting certain design features in a plan or by meeting certain basic requirements, the plan is able to take advantage of a simplified nondiscrimination testing process. The design-based safe harbors created by the Small Business Job Protection Act of 1996 offer contributory 403(b) and 401(k) plans exemption from the 401(m) Matching Test. These safe harbors also offer relief to 401(k) plans from the Average Deferral Percentage (ADP) Test (403(b) plans are not subject to the ADP Test even if they don’t qualify for the design-based safe harbors). To satisfy the design-based safe harbors a plan must either:
Any employee eligible for the contributory plan being tested must be included in the Matching Test calculations, even if he or she is not actually participating in the plan. Eligible but nonparticipating employees should be entered on the system with employer and employee after-tax contributions of zero.
WW
make required base contributions of 3% to the accounts of all NHCs eligible for the plan even if they don’t make any employee contributions, or
WW
make specified matching contributions for all NHCs who elect to participate in the plan.
Certain other requirements involving the plan definition of compensation and annual employee notices must also be satisfied. See Keeping Your Plan In Shape, TIAA’s nondiscrimination testing guide, which can be downloaded from the TIAA Administrator Web Center on the 403(b) Resource section at TIAA.org/administrator for more information on the safe harbors.
38 A guide to the TIAA matching test software
Excess aggregate contributions These contributions are the portion of contributions made to the accounts of Highly Compensated Employees (HCs) in excess of the maximum amount that could have been contributed without causing the plan to fail the Matching Test. If your plan fails the Matching Test, this software will calculate the amount of excess aggregate contributions that must be refun-ded to each HC in order to pass the Matching Test. For information on other methods for satisfying the Matching Test, call the Administrator Telephone Center.
Highly compensated employee Nondiscrimination testing, including the Matching Test performed by this software, is designed to prevent Highly Compensated Employees (HCs) from receiving retirement plan contributions (or benefits) that are disproportionately high compared to those received by Non-Highly Compensated Employees (NHCs). This software automatically determines who is an HC or NHC by comparing their total compensation for the current plan year with the Highly Compensated Employee Amount.
The determination of who is an HC is made on the basis of total compensation for the year prior to the plan year for which testing is being conducted. Generally employees must be classified as HCs if they received total compensation in excess of $80,000 (indexed) in the prior year. See the table on page 21 of this guide for a listing of highly compensated amounts for various plan years. Contact TIAA’s Administrator Telephone Center at 888-842-7782 for further information.
Mandatory plan A mandatory plan requires all employees eligible to participate in the plan to make contributions to the plan as a condition of employment. That is to say, an eligible employee who refuses to contribute to the plan must be fired. Mandatory plans are treated as non-contributory plans for nondiscrimination testing purposes provided that participation is enforced. The required employee contributions are treated as employer contributions for nondiscrimination testing and therefore the plan is not subject to the Matching Test. Since the required employee contributions are treated as employer contributions, they are not subject to the 402(g) limit on elective deferrals ($18,000 in 2015 and $18,000 in 2016).
whether or not to participate in the plan at the time when they first become eligible to participate in any plan of the employer. An employee who signs a one-time, irrevocable salary reduction agreement may not stop contributing to the plan as long as he or she continues working for the plan sponsor. An employee who doesn’t sign the agreement when he or she first becomes eligible for the plan cannot join the plan later. These plans are treated as non-contributory plans for nondiscrimination testing purposes. Employee contributions made under one-time, irrevocable salary reduction agreements are treated as employer contributions and therefore the plan is not subject to the Matching Test. Since the employee contributions are treated as employer contributions, they are not subject to the 402(g) limit on elective deferrals ($18,000 in 2015 and $18,000 in 2016).
Qualified non-elective contributions (QNCS) QNCs are non-elective employer contributions that can be added by the employer to enable a contributory plan to pass the Matching Test. A QNC made within 12 months of the end of the plan year can be counted in performing the Matching Test. To qualify as a QNC, an employer contribution must: WW
Be fully and immediately vested;
One-time irrevocable salary reduction agreement
WW
Not be conditioned on employee contributions;
Plans under which all employee contributions are made under one-time, irrevocable salary reduction agreements when the employee first becomes eligible to participate in any of the employer’s plans are exempt from the Matching Test. These plans require employees to make a decision
WW
Not be available to the employee as cash as an alternative to a plan contribution; and
WW
Not be available for withdrawal prior to age 59½, separation from service, death or disability.
Getting help See Keeping Your Plan In Shape, TIAA’s nondiscrimination testing guide, for more information on the Matching Test. For questions, please contact TIAA’s Administrator Telephone Center at 888-842-7782.
A guide to the TIAA matching test software 39
The tax information contained herein is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding tax penalties that may be imposed on the taxpayer. It was written to support the promotion of the products and services addressed herein. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor. TIAA-CREF Individual & Institutional Services, LLC, Teachers Personal Investors Services, Inc., and Nuveen Securities, LLC, Members FINRA and SIPC, distribute securities products. Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association of America (TIAA) and College Retirement Equities Fund (CREF), New York, NY. ©2016 Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, New York, NY 10017 141015733
(06/16)
