Treasury Regulations · 26 CFR
§ 1.401(a)(4)-1. Nondiscrimination requirements of section 401(a)(4).
Regulation text, no changes From the eCFR, current as of October 15, 2026. The eCFR is an authoritative but unofficial editorial compilation of the Code of Federal Regulations; the official text is the annual CFR on govinfo. Compare it with this section on ecfr.gov (external site) or the official annual CFR on govinfo (external site).
Regulation under 26 U.S.C. § 401(a)(4)
Cite as 26 CFR § 1.401(a)(4)-1
At a glance
Read from the text and its source citation. Not part of the regulation.
- Status
- In the current eCFR
- Issued
- September 3, 1993 by T.D. 8485
- Last amended
- December 29, 2004 by T.D. 9169
- Issued under
- 26 U.S.C. § 401(a)(4)
- Length
- 2,001 words · about 9 min to read
- Cross-references
- cites 5 Code sections and 21 regulations; cited by 23
¶(a) In general. Section 401(a)(4) provides that a plan is a qualified plan only if the contributions or the benefits provided under the plan do not discriminate in favor of HCEs. Whether a plan satisfies this requirement depends on the form of the plan and on its effect in operation. In making this determination, intent is irrelevant. This section sets forth the exclusive rules for determining whether a plan satisfies section 401(a)(4). A plan that complies in form and operation with the rules in this section therefore satisfies section 401(a)(4).
¶(b) Requirements a plan must satisfy—
¶(2) Nondiscriminatory amount of contributions or benefits—
¶(i) General rule. Either the contributions or the benefits provided under the plan must be nondiscriminatory in amount. It need not be shown that both the contributions and the benefits provided are nondiscriminatory in amount, but only that either the contributions alone or the benefits alone are nondiscriminatory in amount.
¶(ii) Defined contribution plans—
¶(A) General rule. A defined contribution plan satisfies this paragraph (b)(2) if the contributions allocated under the plan (including forfeitures) are nondiscriminatory in amount under § 1.401(a)(4)-2. Alternatively, a defined contribution plan (other than an ESOP) satisfies this paragraph (b)(2) if the equivalent benefits provided under the plan are nondiscriminatory in amount under § 1.401(a)(4)-8(b). Section 1.401(a)(4)-8(b) includes a safe-harbor testing method for contributions provided under a target benefit plan.
¶(B) Section 401(k) plans and section 401(m) plans. A section 401(k) plan is deemed to satisfy this paragraph (b)(2) because § 1.410(b)-9 defines a section 401(k) plan as a plan consisting of elective contributions under a qualified cash or deferred arrangement (i.e., one that satisfies section 401(k)(3), the nondiscriminatory amount requirement applicable to qualified cash or deferred arrangements). A section 401(m) plan satisfies this paragraph (b)(2) only if the plan satisfies §§ 1.401(m)-1(b) and 1.401(m)-2. Contributions under a nonqualified cash or deferred arrangement, elective contributions described in § 1.401(k)-1(b)(4)(iv) that fail to satisfy the allocation and compensation requirements of § 1.401(k)-2(a)(4)(i), matching contributions that fail to satisfy § 1.401(m)-2(a)(4)(iii), and qualified nonelective contributions treated as elective or matching contributions for certain purposes under §§ 1.401(k)-2(a)(6) and 1.401(m)-2(a)(6), respectively, are not subject to the special rule in this paragraph (b)(2)(ii)(B), because they are not treated as part of a section 401(k) plan or section 401(m) plan as those terms are defined in § 1.410(b)-9. The contributions described in the preceding sentence must satisfy paragraph (b)(2)(ii)(A) of this section.
¶(iii) Defined benefit plans. A defined benefit plan satisfies this paragraph (b)(2) if the benefits provided under the plan are nondiscriminatory in amount under § 1.401(a)(4)-3. Alternatively, a defined benefit plan satisfies this paragraph (b)(2) if the equivalent allocations provided under the plan are nondiscriminatory in amount under § 1.401(a)(4)-8(c). Section 1.401(a)(4)-8(c) includes a safe-harbor testing method for benefits provided under a cash balance plan. In addition, § 1.401(a)(4)-8(d) provides a safe-harbor testing method for benefits provided under a defined benefit plan that is part of a floor-offset arrangement.
¶(3) Nondiscriminatory availability of benefits, rights, and features. All benefits, rights, and features provided under the plan must be made available in the plan in a nondiscriminatory manner. Rules for determining whether this requirement is satisfied are set forth in § 1.401(a)(4)-4.
¶(4) Nondiscriminatory effect of plan amendments and terminations. The timing of plan amendments must not have the effect of discriminating significantly in favor of HCEs. Rules for determining whether this requirement is satisfied are set forth in § 1.401(a)(4)-5(a). Section 1.401(a)(4)-5(b) provides additional requirements regarding plan terminations.
¶(c) Application of requirements—
¶(1) In general. The requirements of paragraph (b) of this section must be applied in accordance with the rules set forth in this paragraph (c).
¶(2) Interpretation. The provisions of §§ 1.401(a)(4)-1 through 1.401(a)(4)-13 must be interpreted in a reasonable manner consistent with the purpose of preventing discrimination in favor of HCEs.
¶(3) Plan-year basis of testing. The requirements of paragraph (b) of this section are generally applied on the basis of the plan year and on the basis of the terms of the plan in effect during the plan year. Thus, unless otherwise provided, the compensation, contributions, benefit accruals, and other items used to apply these requirements must be determined with respect to the plan year being tested. However, § 1.401(a)(4)-11(g) provides rules allowing for corrective amendments made after the close of the plan year to be taken into account in satisfying certain requirements under paragraph (b) of this section.
¶(i) Relationship between sections 401(a)(4) and 410(b). To be a qualified plan, a plan must satisfy both sections 410(b) and 401(a)(4). Section 410(b) requires that a plan benefit a nondiscriminatory group of employees, and section 401(a)(4) requires that the contributions or benefits provided to employees benefiting under the plan not discriminate in favor of HCEs. Consistent with this requirement, the definition of a plan subject to testing under section 401(a)(4) is the same as the definition of a plan subject to testing under section 410(b), i.e., the plan determined after applying the mandatory disaggregation rules of § 1.410(b)-7(c) and the permissive aggregation rules of § 1.410(b)-7(d). In addition, whichever testing option is used for the plan year under § 1.410(b)-8(a) (e.g., quarterly testing) must also be used for purposes of determining whether the plan satisfies section 401(a)(4) for the plan year.
¶(ii) Special rules for certain aggregated plans. Special rules are set forth in § 1.401(a)(4)-9(b) for applying the nondiscriminatory amount and availability requirements of paragraphs (b)(2) and (b)(3) of this section to a plan that includes one or more defined benefit plans and one or more defined contribution plans that have been permissively aggregated under § 1.410(b)-7(d).
¶(iii) Restructuring. In certain circumstances, a plan may be restructured on the basis of employee groups and treated as comprising two or more plans, each of which is treated as a separate plan that must independently satisfy sections 401(a)(4) and 410(b). Rules relating to restructuring plans for purposes of applying the requirements of paragraph (b) of this section are set forth in § 1.401(a)(4)-9(c).
¶(iv) References to section 410(b). Except as otherwise specifically provided, references to satisfying section 410(b) in §§ 1.401(a)(4)-1 through 1.401(a)(4)-13 mean satisfying § 1.410(b)-2 (taking into account any special rules available in satisfying that section, other than the permissive aggregation rules of § 1.410(b)-7(d)). In the case of a plan described in section 410(c)(1) that has not made the election described in section 410(d) and is not subject to section 403(b)(12)(A)(i), references in §§ 1.401(a)(4)-1 through 1.401(a)(4)-13 to satisfying section 410(b) mean satisfying section 410(c)(2).
¶(5) Collectively-bargained plans. The requirements of paragraph (b) of this section are treated as satisfied by a collectively-bargained plan that automatically satisfies section 410(b) under § 1.410(b)-2(b)(7).
¶(6) Former employees. In applying the nondiscriminatory amount and availability requirements of paragraphs (b)(2) and (b)(3) of this section, former employees are tested separately from active employees, unless otherwise provided. Rules for applying paragraphs (b)(2) and (b)(3) of this section to former employees are set forth in § 1.401(a)(4)-10.
¶(7) Employee-provided contributions and benefits. In applying the nondiscriminatory amount requirement of paragraph (b)(2) of this section, employee-provided contributions and benefits are tested separately from employer-provided contributions and benefits, unless otherwise provided. Rules for determining the amount of employer-provided benefits under a defined benefit plan that include employee contributions not allocated to separate accounts are set forth in § 1.401(a)(4)-6(b), and rules for applying paragraph (b)(2) of this section to employee contributions under such a plan are set forth in § 1.401(a)(4)-6(c). See paragraph (b)(2)(ii)(B) of this section for rules applicable to employee contributions allocated to separate accounts.
¶(8) Allocation of earnings. Notwithstanding any other provision in §§ 1.401(a)(4)-1 through 1.401(a)(4)-13, a defined contribution plan does not satisfy paragraph (b)(2) of this section if the manner in which income, expenses, gains, or losses are allocated to accounts under the plan discriminates in favor of HCEs or former HCEs.
¶(9) Rollovers, transfers, and buybacks. In applying the requirements of paragraph (b) of this section, rollover (including direct rollover) contributions described in section 402(c), 402(e)(6), 403(a)(4), 403(a)(5), or 408(d)(3), elective transfers described in § 1.411(d)-4, Q&A-3(b), transfers of assets and liabilities described in section 414(l), and employee buybacks are treated in accordance with the rules set forth in § 1.401(a)(4)-11(b).
¶(10) Vesting. A plan does not satisfy the nondiscriminatory amount requirement of paragraph (b)(2) of this section unless it satisfies § 1.401(a)(4)-11(c) with respect to the manner in which employees vest in their accrued benefits.
¶(11) Crediting service. A plan does not satisfy paragraphs (b)(2) and (b)(3) of this section unless it satisfies § 1.401(a)(4)-11(d) with respect to the manner in which employees' service is credited under the plan. Service other than actual service with the employer may not be taken into account in determining whether the plan satisfies paragraphs (b)(2) and (b)(3) of this section except as provided in § 1.401(a)(4)-11(d).
¶(12) Governmental plans. The rules of this section apply to a governmental plan within the meaning of section 414(d), except as provided in §§ 1.401(a)(4)-11(f) and 1.401(a)(4)-13(b).
¶(13) Employee stock ownership plans. [Reserved]
¶(14) Section 401(h) benefits. In applying the requirements of paragraph (b) of this section, the portion of a plan providing benefits described in section 401(h) is tested separately from the portion of the same plan providing retirement benefits, and thus is not required to satisfy this section. Rules applicable to section 401(h) benefits are set forth in § 1.401-14(b)(2).
¶(15) Definitions. In applying the requirements of this section, the definitions in § 1.401(a)(4)-12 govern.
¶(16) Effective dates and fresh-start rules. In applying the requirements of this section, the effective dates set forth in § 1.401(a)(4)-13 govern. Section 1.401(a)(4)-13 also provides certain transition and fresh-start rules that apply for purposes of this section.
¶(d) Additional guidance. The Commissioner may, in revenue rulings, notices, and other guidance, published in the Internal Revenue Bulletin, provide any additional guidance that may be necessary or appropriate in applying the nondiscrimination requirements of section 401(a)(4), including additional safe harbors and alternative methods and procedures for satisfying those requirements. See § 601.601(d)(2)(ii)(b) of this chapter.
[T.D. 8485, 58 FR 46780, Sept. 3, 1993, as amended by T.D. 9169, 69 FR 78153, Dec. 29, 2004]
Cross-references
Computed from the citations in the text of 26 CFR.
Code sections it cites
- § 401 Qualified pension, profit-sharing, and stock bonus plans
- § 410 Minimum participation standards
- § 403 Taxation of employee annuities
- § 402 Taxability of beneficiary of employees’ trust
- § 414 Definitions and special rules
Regulations it cites
- § 1.401(a)(4)-2 Nondiscrimination in amount of employer contributions under a defined contribution plan.
- § 1.401(a)(4)-8 Cross-testing.
- § 1.410(b)-9 Definitions.
- § 1.401(m)-1 Employee contributions and matching contributions.
- § 1.401(k)-1 Certain cash or deferred arrangements.
- § 1.401(k)-2 ADP test.
- § 1.401(m)-2 ACP test.
- § 1.401(a)(4)-3 Nondiscrimination in amount of employer-provided benefits under a defined benefit plan.
- § 1.401(a)(4)-4 Nondiscriminatory availability of benefits, rights, and features.
- § 1.401(a)(4)-5 Plan amendments and plan terminations.
- § 1.401(a)(4)-11 Additional rules.
- § 1.410(b)-7 Definition of plan and rules governing plan disaggregation and aggregation.
- § 1.410(b)-8 Additional rules.
- § 1.401(a)(4)-9 Plan aggregation and restructuring.
- § 1.410(b)-2 Minimum coverage requirements (after 1993).
- § 1.401(a)(4)-10 Testing of former employees.
- § 1.401(a)(4)-6 Contributory defined benefit plans.
- § 1.411(d)-4 Section 411(d)(6) protected benefits.
- § 1.401-14 Inclusion of medical benefits for retired employees in qualified pension or annuity plans.
- § 1.401(a)(4)-12 Definitions.
- § 1.401(a)(4)-13 Effective dates and fresh-start rules.
Cited by 23 other regulations
- § 1.401(a)-4 Optional forms of benefit (before 1994).
- § 1.401(a)(4)-0 Table of contents.
- § 1.401(a)(4)-2 Nondiscrimination in amount of employer contributions under a defined contribution plan.
- § 1.401(a)(4)-3 Nondiscrimination in amount of employer-provided benefits under a defined benefit plan.
- § 1.401(a)(4)-5 Plan amendments and plan terminations.
- § 1.401(a)(4)-6 Contributory defined benefit plans.
- § 1.401(a)(4)-8 Cross-testing.
- § 1.401(a)(4)-9 Plan aggregation and restructuring.
- § 1.401(a)(4)-10 Testing of former employees.
- § 1.401(a)(4)-11 Additional rules.
- § 1.401(a)(4)-12 Definitions.
- § 1.401(a)(4)-13 Effective dates and fresh-start rules.
- § 1.401(k)-1 Certain cash or deferred arrangements.
- § 1.401(k)-2 ADP test.
- § 1.401(k)-3 Safe harbor requirements.
- § 1.401(l)-1 Permitted disparity in employer-provided contributions or benefits.
- § 1.401(l)-3 Permitted disparity for defined benefit plans.
- § 1.401(m)-1 Employee contributions and matching contributions.
- § 1.401(m)-2 ACP test.
- § 1.402(g)-1 Limitation on exclusion for elective deferrals.
- § 1.410(b)-3 Employees and former employees who benefit under a plan.
- § 1.410(b)-5 Average benefit percentage test.
- § 54.4979-1 Excise tax on certain excess contributions and excess aggregate contributions.
Amendment history
From the source citation at the end of the section, newest first. T.D. is a Treasury decision; FR is the Federal Register.
- Amended by T.D. 9169 (69 FR 78153)
- Issued by T.D. 8485 (58 FR 46780)
Where it sits in 26 CFR
- Subchapter A Income tax
- Part 1 Income taxes
- Pension, Profit-Sharing, Stock Bonus Plans, etc.
Nearby sections
- § 1.401(a)-30 Limit on elective deferrals.
- § 1.401(a)-50 Puerto Rican trusts; election to be treated as a domestic trust.
- § 1.401(a)(2)-1 Refund of mistaken employer contributions and withdrawal liability payments to multiemployer plans.
- § 1.401(a)(4)-0 Table of contents.
- § 1.401(a)(4)-1 Nondiscrimination requirements of section 401(a)(4).
- § 1.401(a)(4)-2 Nondiscrimination in amount of employer contributions under a defined contribution plan.
- § 1.401(a)(4)-3 Nondiscrimination in amount of employer-provided benefits under a defined benefit plan.
- § 1.401(a)(4)-4 Nondiscriminatory availability of benefits, rights, and features.
- § 1.401(a)(4)-5 Plan amendments and plan terminations.