Reverse QNEC allocation Sample Clauses
The Reverse QNEC allocation clause outlines how Qualified Nonelective Contributions (QNECs) are distributed in a retirement plan, specifically by allocating these contributions in a manner opposite to the standard method. Typically, instead of providing QNECs to all eligible employees or those with the lowest compensation, this clause allows the plan sponsor to allocate QNECs to higher-paid employees or those who failed certain nondiscrimination tests. This approach is often used to correct failed nondiscrimination tests in 401(k) plans, ensuring the plan remains compliant with IRS regulations. The core function of this clause is to provide flexibility in correcting plan testing failures, thereby maintaining the plan’s qualified status and avoiding penalties.
Reverse QNEC allocation. Under the reverse QNEC allocation method, the Plan Administrator (subject to Section 3.06 if applicable), will allocate a QNEC first to the NHCE Participant(s) with the lowest Compensation for the Plan Year in an amount not exceeding the Annual Additions Limit for each Participant, with any remaining amounts allocated to the next highest paid NHCE Participant(s) not exceeding his/her Annual Additions Limit and continuing in this manner until the Plan Administrator has fully allocated the QNEC.
Reverse QNEC allocation. Under the reverse QNEC allocation method, the Plan Administrator (subject to Section 3.06, if applicable) will allocate a QNEC first to the NHCE Participant(s) with the lowest Compensation for the Plan Year in an amount not exceeding the Annual Additions Limit for each Participant, with any remaining amounts allocated to the next highest paid NHCE Participant(s) not exceeding his/her Annual Additions Limit and continuing in this manner until the Plan Administrator has fully allocated the QNEC. The amount of the QNEC allocated to any Participant will not exceed the targeting limitations described in Sections 3.04(C)(5) and 4.10(D).