Form 5300, Application for Determination for Employee Benefit Plan, Schedule Q (Form 5300), Elective Determination Requests

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Instructions for Schedule Q (Form 5300)

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Instructions for
Schedule Q (Form 5300)

Department of the Treasury
Internal Revenue Service

(Rev. August 2004)
Elective Determination Requests
Section references are to the Internal Revenue Code unless otherwise noted.

General Instructions

Specific Instructions

Purpose of Schedule

Participation, Coverage,
and Nondiscrimination
Requirements

The information requested on Schedule Q
(Form 5300) relates to the manner in
which your plan satisfies certain
qualification requirements relating to
minimum participation, coverage, and
nondiscrimination. This schedule allows
you to indicate whether you wish certain
of these requirements to be considered
by the IRS in its review of your plan.

Who May File
The use of this schedule is optional. Filers
of Form 5300, Application for
Determination for Employee Benefit Plan,
Form 5307, Application for Determination
for Adopters of Master or Prototype or
Volume Submitter Plans, and Form 5310,
Application for Determination for
Terminating Plan, may elect to complete
and file Schedule Q (Form 5300) with
their application to broaden the scope of a
determination letter, by requesting
determinations for certain coverage and
nondiscrimination requirements that are
not routinely addressed in a determination
letter in conjunction with an application for
determination letter.
If Schedule Q is not filed, the
determination letter issued for this
CAUTION plan will not consider and may not
be relied upon with regard to the general
test and certain other provisions under
section 401(a)(4), the average benefit test
under section 410(b), and the definition of
compensation provisions of section
414(s).

!

What to Complete
If you elect to use this schedule, complete
all lines unless otherwise directed.
Applicants requesting specific
determinations are required to submit
demonstrations showing how their plans
satisfy the minimum participation,
coverage, and nondiscrimination
requirements, as applicable. The
demonstrations are explained in these
instructions. Information or computations
that are used for more than one purpose
may not be cross-referenced but must be
repeated for each applicable
demonstration.

Line 1. If ‘‘Yes’’ is checked, attach a
schedule labeled Demo 1.
Demo 1 is prepared to show how a
plan that is using the qualified separate
line of business (QSLOB) rules of section
414(r) satisfies the gateway test of
section 410(b)(5)(B) or satisfies the
special rules for employer-wide plans.
See Guidelines for Certain
Demonstrations on page 2.
If a request for an administrative
scrutiny determination on any separate
line of business of the employer is
pending with IRS, submit a copy of the
confirmation receipt issued by IRS with
the application.
Line 2. A determination letter issued for a
defined benefit plan that requests a
determination regarding section 410(b)
will also be a determination regarding
section 401(a)(26).
Line 3. Determination letters generally do
not provide reliance that benefits, rights,
and features under a plan satisfy the
nondiscriminatory current availability
requirement of Regulations section
1.401(a)(4)-4(b).
Answer ‘‘Yes’’ only if requesting a
determination that any specified benefit,
right, or feature meets the
nondiscriminatory current availability
requirement of Regulations section
1.401(a)(4)-4(b).
If ‘‘Yes’’ is checked you must provide a
demonstration for each benefit, right, and
feature you wish considered. Label this
attachment Demo 3. Also see Guidelines
for Certain Demonstrations on page 2.
Line 4. Check ‘‘Yes’’ and attach Demo 4
if you are requesting a determination that
the plan satisfies the average benefit test
of section 410(b) or the nondiscrimination
requirements of section 401(a)(4) and for
purposes of satisfying these
requirements, any of the following apply:
• The plan is disaggregated because:
1. The plan includes a section 401(k)
or 401(m) plan and a portion that is not a
section 401(k) or 401(m) plan,
2. The plan includes an ESOP and a
portion that is not an ESOP,
Cat. No. 22189C

3. The employer applies section
410(b) separately to the portion of the
plan that benefits only employees who
satisfy age and service conditions under
the plan that are lower than the greatest
minimum age and service conditions
permissible under section 410(a),
4. The plan benefits employees of
more than one qualified separate line of
business (unless the plan is tested under
the special rule for employer-wide plans
in Regulations section 1.414(r)-1(c)(2)(ii)),
5. The plan benefits the
noncollectively bargained employees of
more than one employer.
6. The plan benefits both collectively
bargained and noncollectively bargained
employees.
• The plan is permissively aggregated
with another plan under Regulations
section 1.410(b)-7(d).
• The plan is restructured into
component plans under Regulations
section 1.401(a)(4)-9.
See instructions for Demo 4 under
Guidelines for Certain Demonstrations on
page 3. Also, see the instructions for line
9 for additional information that may be
required in Demo 4.
Line 5. This line is a request for a
determination that the plan satisfies the
minimum coverage requirements of
section 410(b) due to satisfying the
average benefit test of 1.410(b)-2(b)(3).
If a determination regarding the
average benefit test is being requested,
check ‘‘Yes’’ and see the instructions for
Demo 5 under Guidelines for Certain
Demonstrations on page 3.
This determination relates only to the
satisfaction of the requirements of section
410(b). This determination is mutually
exclusive of any determination that the
plan may satisfy section 401(a)(4). If the
plan must satisfy a general test in order to
satisfy section 401(a)(4), a determination
that the plan satisfies the average benefit
test is not a determination that the plan’s
rate groups satisfy the modified average
benefit test that is included in the general
test.
Line 6. This is exclusively a request for a
determination that the plan satisfies the
nondiscrimination in amount or benefits
requirements under section 401(a)(4) of
the Code using a non-design based safe
harbor or a general test. This
determination is mutually exclusive of any
determination that the plan may satisfy
section 410(b). A determination that the
plan satisfies the average benefit test is

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not a determination that the plan’s rate
groups satisfy the modified average
benefit test that is included in the general
test.
If this is a request for a determination
regarding a non-design based safe harbor
or a general test see the instructions for
Demo 6 under Guidelines for Certain
Demonstrations on pages 4 and 5. The
Demo 6 must show that the plan satisfies
either:
1. The contributions or benefits
general test in Regulations sections:
• 1.401(a)(4)-2(c),
• 1.401(a)(4)-3(c),
• 1.401(a)(4)-8(b)(2),
• 1.401(a)(4)-8(c)(2),
• 1.401(a)(4)-8(c)(3)(iii)(C), or
• 1.401(a)(4)-9(b).
2. The nondesign-based safe harbors
described in Regulations section
1.401(a)(4)-2(b)(3) (safe harbor for
uniform point plans) or Regulations
section 1.401(a)(4)-3(b)(4)(i)(C)(3)
(alternative safe harbor for flat benefit
plans).
Also enter one of the following letters
in the space provided in line 6 that
indicates if the determination requested
relates to:
1. A Defined Benefit Plan (DBP)
being tested under the general test in
Regulations section 1.401(a)(4)-3(c) that
involves a facts and circumstances
determination under the ‘‘safety valve’’
rule in Regulations section
1.401(a)(4)-3(c)(3);
2. A plan being tested under a
general test that does not involve a
determination under the safety valve rule;
or
3. A plan intended to satisfy a
nondesign-based safe harbor.
Line 7. Check line 7(i) ‘‘Yes’’ if a
determination is being requested
regarding any plan provision which
provides for pre-participation or imputed
service as defined in Regulations section
1.401(a)(4)-11(d)(3)(ii). Check line 7(ii)
‘‘Yes’’ if a determination is being
requested for a plan amendment or, in the
case of an initial determination, a plan
provision which provides for a period of
past service that exceeds the period set
forth in the safe harbor in Regulations
section 1.401(a)(4)-5(a)(3).
Do not check ‘‘Yes’’ if past service,
pre-participation service, or imputed
service is credited under the plan solely to
the extent required by one or more of the
following:
1. The service crediting rules under
section 410(a) (eligibility), section 411(a)
(vesting), section 413 (collectively
bargained plans), or section 414(a)
(service for predecessor employer),
2. The hour of service method under
29 CFR 2530.200b-2 and the elapsed
time service-crediting methods under
Regulations section 1.410(a)-7, and
3. The prohibition on double proration
of service and compensation in 29 CFR
section 2530.204-2(d).

If ‘‘Yes’’ is checked, attach a schedule
label Demo 7. See the instructions for
Demo 7 under Guidelines for Certain
Demonstrations on page 5.
Line 8. Check ‘‘Yes’’ if a determination is
being requested for a plan that is part of a
floor arrangement. If “Yes” is checked,
attach a schedule labeled Demo 8. See
the instructions for Demo 8 under
Guidelines for Certain Demonstrations on
page 5.

Nondiscriminatory
Compensation and
Employee Contributions
Line 9. Check “Yes” if a determination is
being requested where:
1. The plan bases contributions or
benefits on a definition of compensation
that does not satisfy the requirements of
Regulations section 1.414(s)-1(c)(2) or
(3); or
2. The plan includes a section 401(k)
and/or section 401(m) plan that
incorporates an actual deferral
percentage or actual contribution
percentage test using a definition of
compensation that does not satisfy the
requirements of Regulations sections
1.414(s)-1(c)(2) or (3).
If this plan has been disaggregated
into separate plans or restructured into
component plans, this line may be
checked “Yes” to request a determination
if any of the separate disaggregated plans
or restructured component plans are
described in 1 or 2 above. Also complete
a Demo 4 and indicate on the Demo 4
each disaggregated plan or component
plan to which 1 or 2 applies.

!

Section 401(k) and 401(m) plans
may not be restructured.

CAUTION

Attach Demo 9 if you checked “Yes”
and see the instructions for Demo 9 under
Guidelines for Certain Demonstrations on
page 5.
Line 10. Check “Yes” if this is a defined
benefit plan and a determination is being
requested regarding employee
contributions not allocated to separate
accounts.
Line 11. Enter the letter shown on the
form that corresponds to the method that
is being used to determine the
employer-provided benefit for purposes of
Regulations section 1.401(a)(4)-6(b). The
composition-of-workforce and minimum
benefit methods may only be used with
plans that satisfy the unit credit safe
harbor in Regulations section
1.401(a)(4)-3(b)(3).
If you enter the letter “A,” attach a
Demo 10. See the instructions for Demo
10 under Guidelines for Certain
Demonstrations on page 5. If applicable,
also indicate the plan factor.
Line 12. Enter the letter that corresponds
to the method used to show that the
employee-provided benefit is

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nondiscriminatory in amount. See
Regulations section 1.401(a)(4)-6(c).
If you enter the letter “C,” attach a
Demo 11, if applicable. See the
instructions for Demo 11 under
Guidelines for Certain Demonstrations on
page 5.

Guidelines For Certain
Demonstrations
The following instructions describe
additional information that must be
included in the demonstrations.
Applicants must follow the
guidelines in these instructions
CAUTION and indicate in their
demonstrations where the elements in the
guidelines are addressed. Applicants
must explain why any elements have not
been addressed.
Information or computations that are
used for more than one purpose or
provided elsewhere in the application may
not be cross-referenced.

!

Demo 1 – Qualified Separate
Lines of Business
Provide a schedule with the following
information, as applicable:
1. The Code section(s) for which the
employer is testing on a separate line of
business basis (for example, section
410(b) or section 401(a)(26)),
2. The separate lines of business that
have employees benefiting under the
plan,
3. A demonstration of how the plan
meets the nondiscriminatory classification
requirement of section 410(b)(5)(B) and
Regulations section 1.414(r)-8(b)(2) on an
employer-wide basis, and
4. If the requirements of section
410(b) or section 401(a)(26) are to be
applied to this plan on an employer-wide
basis under the special rules for
employer-wide plans, a demonstration of
how the plan meets the requirements of
the applicable special rule in Regulations
sections 1.414(r)-1(c)(2)(ii) or
1.414(r)-1(c)(3)(ii).

Demo 2
A Demonstration is not required. See
explanation for line 2 on the Schedule Q
(Form 5300).

Demo 3 – Nondiscriminatory
Current Availability of Benefits,
Rights, and Features
1. An applicant requesting a
determination that a plan satisfies the
nondiscriminatory current availability
requirement of Regulations section
1.401(a)(4)-4(b) for any benefit, right, or
feature (‘‘BRF’’) specified by the applicant
should ordinarily demonstrate the
following for each BRF that the applicant
wants considered:
a. Identify the specific BRF, including
terms pertaining to the BRF, such as
eligibility conditions, timing, election
rights, etc.

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b. Cite the plan provisions that
describe the BRF and all terms relating to
the BRF.
c. Describe any conditions on the
availability of the BRF that were
disregarded in determining current
availability.
d. If the BRF is contingent on an
unpredictable event, describe the
contingency and determine current
availability as if the event had occurred.
e. If applicable, describe how the
special rule in Regulations section
1.401(a)(4)-4(d)(3), relating to early
retirement window benefits, has been
applied.
2. If the BRF is an optional form of
benefit, ancillary benefit, or other right or
feature that has been aggregated, for
testing purposes, with another optional
form of benefit, ancillary benefit, or other
right or feature, respectively, show how
the requirements of Regulations section
1.401(a)(4)-4(d)(4)(i)(A) and (B) are
satisfied.
3. Describe the group of employees to
whom the BRF is available and indicate if
this group includes any nonexcludable
employees with accrued benefits who are
not currently benefiting (‘‘frozen plan
participants’’).
4. Demonstrate one of the following with
respect to the specified BRF:
a. The group of employees to whom
the benefit is currently available satisfies
the section 410(b) ratio percentage test.
b. The BRF has been prospectively
eliminated and satisfies the section
410(b) ratio percentage test as of the
elimination date.
c. The BRF is available only to an
acquired group of employees and the
requirements of Regulations sections
1.401(a)(4)-4(d)(1)(i)(A) and (B) are
satisfied.
d. The plan is a permissively
aggregated plan and the BRF is a
spousal benefit described in Regulations
section 1.401(a)(4)-4(d)(5).
e. The plan is an ESOP and the BRF
is an investment diversification right or
feature or distribution option available
only to all qualified participants (as
defined in section 401(a)(28)(B)(iii)) or the
failure of the BRF to satisfy current
availability results solely from the
restrictions of section 409(n).
f. The plan is a permissively
aggregated defined benefit/defined
contribution (DB/DC) plan; the BRF is not
a single sum benefit, loan, ancillary
benefit, or benefit commencement date
(including the availability of in-service
withdrawals); the BRF is provided under
only one type of plan; and the BRF is
currently available to all NHCEs in all
plans of the same type as the plan under
which it is provided.
5. If the BRF is available to frozen plan
participants, show how one of the
requirements in Regulations sections
1.401(a)(4)-4(d)(2)(i) through (iv) is
satisfied.

Demo 4 – Test for
Restructuring, Mandatory
Disaggregation, or Permissive
Aggregation
Explain the basis of the disaggregation,
permissive aggregation, or restructuring;
identifying the aggregated or separate
disaggregated plans or component plans,
and demonstrate how any restructured
component plans satisfy section 410(b)
as if they were separate plans.
Any other plan that has been
permissively aggregated with this plan
should be identified by:
• Name,
• Plan number, and
• Employer Identification Number (EIN).
Describe the benefit or allocation
formula of the other plan and indicate if
that plan has received or applied for a
determination letter.

Demo 5 – Average Benefit Test
1. An applicant requesting a
determination that a plan satisfies the
average benefit test must demonstrate
compliance with the nondiscriminatory
classification test of Regulations section
1.410(b)-4 including, if applicable, the
facts and circumstances determination
under Regulations section
1.410(b)-4(c)(3).
The determination regarding the
average benefit test is not available to a
plan that satisfies the ratio percentage
test.
The demonstration for the average
benefit test should provide, for each
Highly Compensated Employee (HCE)
and each Non-Highly Compensated
Employee (NHCE) the compensation
used in the test, the allocation or benefit
being tested and the actual benefit
percentages. The average benefit
percentages for HCEs and NHCEs must
be provided.
2. A plan that is deemed to satisfy the
average benefit percentage test under the
special rule in Regulations section
1.410(b)-5(f) must demonstrate that the
plan would satisfy the ratio percentage
test if the excludable employee and
mandatory disaggregation rules for
collectively bargained and noncollectively
bargained employees did not apply.
3. In addition to the above information,
the average benefit percentage
demonstration must identify and describe
the method used for determining
employee benefit percentages (see
Regulations sections 1.410(b)-5(d) and
(e)), include the information listed below,
under the heading All Plans, as
applicable.
The demonstration must include the
portion of the coverage test showing the
data used in the calculations and the
calculations for each participant.
Participants need not be identified.
However, the IRS may request that
additional information be submitted if
necessary.

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All Plans
All plans using the average benefit test
must also include the following
information on Demo 5:
1. The testing period (see Regulations
section 1.410(b)-5(e)(5) for an optional
averaging rule).
2. The definition of testing service
(including imputed and pre-participation
service).
3. A description of the testing group (see
Regulations section 1.410(b)-7(e)).
4. Whether the employee benefit
percentages are determined on a
contributions or benefits basis.
5. Whether permitted disparity under
Regulations section 1.401(a)(4)-7 is
imputed in determining employee benefit
percentages.
6. An explanation of how allocation or
accrual rates are grouped on the test.
7. A description of how contributions or
benefits are normalized, including
actuarial assumptions used.
8. The definition of section 414(s)
compensation used in determining plan
year compensation or average annual
compensation and a demonstration
showing the definition as
nondiscriminatory. If plan year
compensation or average annual
compensation is determined using a
definition of compensation that satisfies
Regulations section 1.414(s)-1(c)(2) or (3)
the explanation should state whether the
definition satisfies Regulations section
1.414(s)-1(c)(2) or (3). For guidance
pertaining to this demonstration, see the
guidelines under the Demo 9 instructions
on page 5 pertaining to nondiscriminatory
compensation.
9. A description of the method of
determining compensation used in
determining employee benefit
percentages.
10. The testing age of employees (not
applicable to defined contribution plans
testing on a contribution basis).

Plans with Defined Benefit Plans
in the Testing Group
Plans with DBP’s in the testing group
must also provide the following
information if applicable.
11. Show if accruals after normal
retirement age are taken into account
and, if such accruals are disregarded as
provided in Regulations section
1.401(a)(4)-3(f)(3), the basis on which
they are disregarded.
12. Show if most valuable rates must be
used under Regulations section
1.410(b)-5(d)(7), and, if so, show how
those rates are determined.
13. Show if a defined benefit plan
disregards offsets described in
Regulations section 1.401(a)(4)-3(f)(9),
give a description of such offsets, and
show how they satisfy Regulations
section 1.401(a)(4)-3(f)(9).
14. Show if any disability benefits are
taken into account in determining
employees’ accrued benefits under

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Regulations section 1.401(a)(4)-3(f)(2),
and, if so, cite the plan provisions that
permit these disability benefits to be taken
into account.
15. Show if any other special rules in
testing a plan for nondiscrimination in
amounts are applied. For example, the
rules applicable to the determination of
benefits on other than a plan-year basis
described in Regulations section
1.401(a)(4)-3(f)(6), the adjustments for
certain plan distributions provided in
Regulations section 1.401(a)(4)-3(f)(7),
and the adjustment for certain qualified
preretirement survivor annuity charges as
provided in Regulations section
1.401(a)(4)-3(f)(8).
16. Plans with employee contributions
not allocated to separate accounts: give a
description of the method for determining
the employer-provided accrued benefit
under Regulations section
1.401(a)(4)-6(b) and the location of
relevant plan provisions. If the method for
determining the employer-provided
accrued benefit is the
composition-of-workforce method, the
demonstration must show that the
eligibility requirements of Regulations
section 1.401(a)(4)-6(b)(2)(ii) are
satisfied; if the grandfather rule of
Regulations section 1.401(a)(4)-6(b)(4) is
used, the demonstration must show, if
applicable, that the benefits provided on
account of employee contributions at
lower levels of compensation are
comparable to those provided on account
of employee contributions at higher levels
of compensation.

Employee Benefit Percentages
Determined Using Cross-Testing
17. Provide a description of the method
used to determine equivalent allocations
and benefits.

Demo 6 – General Test
A request for a determination that a plan
satisfies any of the general tests in
Regulations sections
• 1.401(a)(4)-2(c),
• 1.401(a)(4)-3(c),
• 1.401(a)(4)-8(b)(2),
• 1.401(a)(4)-8(c)(2),
• 1.401(a)(4)-8(c)(3)(iii)(C), or
• 1.401(a)(4)-9(b)
must include a nondiscrimination test
showing that the plan passes the relevant
general test, and provide the information
listed under All Plans (unless otherwise
noted), and if applicable, under Defined
Benefit Plans Only or Cross-Tested Plans
Only. However, the IRS may request that
additional information be submitted if
necessary.

All Plans (unless otherwise noted)
All plans must submit the information
requested in items 1 through 11 (below).
1. Provide the portion of the
nondiscrimination test that provides the
data for each participant and
demonstrates that the plan satisfies
section 401(a)(4). Participants need not
be identified by name. Tests that include

two or more component plans (such as
profit-sharing, money purchase, 401(k)
and 401(m)) should show the allocations
or benefits under each component plan.
2. Identify each rate group under the plan
and include a demonstration of how each
rate group satisfies section 410(b). If the
plan is a DBP that is being tested on the
basis of the amount of benefits, rate
groups must be determined on the basis
of both normal and most valuable accrual
rates which are expressed as a dollar
amount or a percentage of compensation.
If the most valuable accrual rate is
determined in accordance with the special
rule in Regulations section
1.401(a)(4)-3(d)(3)(iv) (floor on most
valuable accrual rate), this must be
indicated.
3. State whether the plan is being tested
on a contributions or benefits basis.
4. Provide the plan year being tested.
5. Provide a description of the method of
determining allocation or accrual rates,
and if the plan is tested on a benefits
basis, the measurement period and
definition of testing service (including
imputed and pre-participation service).
6. State whether the test is imputing
permitted disparity under Regulations
section 1.401(a)(4)-7.
7. Provide an explanation of how
allocation or accrual rates are grouped.
8. Provide an explanation of how benefits
are normalized on the test, including the
actuarial assumptions used (not
applicable to defined contribution plans
testing on a contributions basis).
9. State the definition of section 414(s)
compensation used in determining plan
year compensation or average annual
compensation and a demonstration
showing the definition as
nondiscriminatory. If plan year
compensation or average annual
compensation is determined using a
definition of compensation that satisfies
Regulations sections 1.414(s)-1(c)(2) or
(3) state whether the definition satisfies
1.414(s)-1(c)(2) or whether the definition
satisfies 1.414(s)-1(c)(3). See the
guidelines under the Demo 9 instructions
pertaining to nondiscriminatory
compensation for guidance pertaining to
this demonstration.
10. Provide the method of determining
average annual compensation used in
testing the plan for nondiscrimination as
defined in Regulations section
1.401(a)(4)-3(e)(2) or give a description of
the period used in determining plan year
compensation.
11. Provide the testing age of employees,
include fractions of year if test is based on
fractional age (not applicable to a Defined
Contribution Plan (DCP) testing on a
contributions basis).

Defined Benefit Plans Only
All DBP’s must also provide the following
information if applicable:
12. State whether accruals after normal
retirement age are taken into account,
and if such accruals are disregarded as

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provided in Regulations section 1.401(a)
(4)-3(f)(3), provide the basis on which
they are disregarded.
13. State whether early retirement
window benefits are taken into account in
determining accrual rates and whether
such benefits are being disregarded
under Regulations section
1.401(a)(4)-3(f)(4)(ii). Also provide the
basis on which they are disregarded.
14. State whether any unpredictable
contingent event benefits were taken into
account in determining accrual rates
under Regulations section
1.401(a)(4)-3(f)(5) and provide the basis
on which they are taken into account.
15. State whether the plan disregards
offsets described in Regulations section
1.401(a)(4)-3(f)(9), provide a description
of such offsets, and show how they
satisfy Regulations section
1.401(a)(4)-3(f)(9).
16. State whether any disability benefits
are taken into account in determining
employees’ accrued benefits under
Regulations section 1.401(a)(4)-3(f)(2),
and if so, cite the plan provisions that
permit these disability benefits to be taken
into account.
17. State whether any other special rules
in Regulations section 1.401(a)(4)-3(f) are
applied in testing a plan for
nondiscrimination in amount, for example:
• The rules applicable to the
determination of benefits on other than a
plan-year basis described in Regulations
section 1.401(a)(4)-3(f)(6),
• The adjustment for certain plan
distributions provided in Regulations
section 1.401(a)(4)-3(f)(7), and
• The adjustment for certain qualified
preretirement survivor annuity charges as
provided in Regulations section
1.401(a)(4)-3(f)(8).
18. Plans with employee contributions
not allocated to separate accounts should
include:
• A description of the method for
determining whether employee-provided
accrued benefits are nondiscriminatory
under Regulations section
1.401(a)(4)-6(c),
• The method for determining the
employer-provided accrued benefit under
Regulations section 1.401(a)(4)-6(b), and
• The location of relevant plan
provisions.
If the method for determining the
employer-provided accrued benefit is the
composition-of-workforce method, the
demonstration must show that the
eligibility requirements of Regulations
section 1.401(a)(4)-6(b)(2)(ii) are
satisfied.
If the grandfather rule of Regulations
section 1.401(a)(4)-6(b)(4) is used, the
demonstration must show, if applicable,
that the benefits provided on account of
employee contributions at lower levels of
compensation are comparable to those
provided on account of employee
contributions at higher levels of
compensation.

Page 5 of 5

Instructions for Schedule Q (Form 5300)

12:54 - 15-SEP-2004

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

19. If the plan would otherwise fail to
satisfy the general test in Regulations
section 1.401(a)(4)-3(c)(1), and a
determination is being sought that the
failure may be disregarded as permitted
by the special rule in Regulations section
1.401(a)(4)-3(c)(3), describe the relevant
facts and circumstances that support the
use of this rule.

Cross-Tested Plans Only
20. Provide a description of the method
used to determine equivalent allocations
and benefits.
21. For defined contribution plans, the
demonstration must list each participant’s
allocation rate for the plan being tested
and list the equivalent benefit accrual rate
(including component plans) for each
participant.

Demo 6 – Safe Harbor for
Uniform Points Plans
Each demonstration of the safe harbor for
uniform points plans in Regulations
section 1.401(a)(4)-2(b)(3) should include
the following information:
1. Provide a description of the plan’s
allocation formula and the location of
relevant plan provisions.
2. State the definition of section 414(s)
compensation used in determining plan
year compensation and give a
demonstration showing the definition as
nondiscriminatory. If the plan determines
plan year compensation using a definition
of compensation that satisfies
Regulations section 1.414(s)-1(c)(2) or
(3), state whether the definition satisfies
1.414(s)-1(c)(2) or (3).
See the guidelines in Demo 9 below
pertaining to nondiscriminatory
compensation for guidance pertaining to
this demonstration.
3. Provide the portion of the
nondiscrimination test that provides the
data for each participant and
demonstrates that the plan satisfies
section 401(a)(4). The data must include
the units for each participant being tested
and the underlying basis for the units
such as age, years of service, or
compensation. Show the allocation rate
for each eligible participant. Show the
average of the allocation rates
(determined without imputing permitted
disparity) for the highly compensated and
for the nonhighly compensated
employees benefiting under the plan.

Demo 6 – Alternative Safe
Harbor for Flat Benefit Plans
Each demonstration of the alternative
safe harbor for flat benefit plans in
Regulations section
1.401(a)(4)-3(b)(4)(i)(C)(3) must set forth
the average of the normal accrual rates
for all nonhighly compensated
nonexcludable employees and the
average of the normal accrual rates for all

highly compensated nonexcludable
employees. In addition, the demonstration
should provide the additional information
described under Demo 6 – General Test,
relating to the determination of normal
accrual rates, except for the information
described in paragraphs numbered 1, 2,
6, 18, and 19.

Demo 7 – Test for
Pre-participation or Imputed
Service
If a determination is being requested,
attach a schedule that includes the
following:
1. A description of the nature of the grant
of past service or pre-participation or
imputed service,
2. The location of the various plan
provisions that provide for the granting of
the service, and
3. In the case of pre-participation or
imputed service, state if the service is
being taken into account in determining if
the plan satisfies Regulations section
1.401(a)(4)-1(b)(2).

Demo 8 – Test for Floor Offset
Arrangement
If a determination is being requested,
attach a statement giving the name, EIN,
and plan type (for example, defined
benefit or profit-sharing) of the other plan
that is part of the arrangement.
Also indicate if the other plan has
received a favorable determination letter
or is requesting a determination letter
simultaneously with this application.

Demo 9 – Nondiscriminatory
Compensation
If a determination is being requested, a
demonstration that a definition of
compensation is nondiscriminatory under
the test in Regulations section
1.414(s)-1(d) should include the following
information:
1. It should state if the demonstration
relates to a definition used to determine
contributions or benefits, or a definition
used in a section 401(k) and/or section
401(m) plan’s ADP and/or ACP test.
2. It should state the definition of
compensation being tested (and cite the
plan provision where applicable), and
indicate whether the definition uses rate
of compensation or includes
prior-employer compensation or imputed
compensation.
3. It should identify the period for which
compensation data is given.
4. It should state whether the test is
based on the compensation of all
employees benefiting under the plan or all
employees benefiting under all plans of
the employer for which the same
alternative definition of compensation is
used to determine that the plan satisfies

-5-

section 401(a)(4). It should also state
whether all employees with zero total
compensation have been excluded from
the test. The demonstration should state
the numbers of HCEs and NHCEs whose
compensation is taken into account in the
demonstration.
5. For both the highly compensated and
nonhighly compensated groups of
employees, it should state whether the
test uses an aggregate, individual, or
other reasonable method to calculate
inclusion percentages. If an “other”
method is used, this should be described.
6. With regard to the determination of
total compensation and compensation
included under the definition being tested,
the demonstration should:
a. Specify the section 415(c)(3)
definition of compensation used in
determining total compensation;
b. Indicate if total compensation
includes elective contributions and
deferred compensation and, if applicable,
if and how the adjustment required by
Regulations section 1.414(s)-1(d)(3)(ii)(B)
has been made; and
c. State if, for purposes of the test,
compensation included under the
definition being tested is limited to total
compensation and if both total
compensation and compensation
included under the definition being tested
are limited to amounts not in excess of
the limit in section 401(a)(17).
7. The demonstration should show, for
both groups of employees, the respective
inclusion percentages, and also describe
the manner in which such inclusion
percentages are determined.
8. Finally, if the HCEs inclusion
percentage is greater than the NHCEs
inclusion percentage, the demonstration
should set forth any facts relevant to
whether the difference is de minimis.

Demo 10 – Employer-Provided
Benefit Method
If a determination is being requested
attach a demonstration showing that the
eligibility requirements of Regulations
section 1.401(a)(4)-6(b)(2)(ii) are
satisfied. If applicable, also indicate the
plan factor.

Demo 11 – Test to Show
Employer-Provided Benefit is
Nondiscriminatory in Amount
If a determination is being requested
attach a demonstration, if applicable, that
the benefits provided on account of
employee contributions at lower levels of
compensation are comparable to those
provided on account of employee
contributions at higher levels of
compensation, as required by
Regulations section
1.401(a)(4)-6(c)(4)(ii)(D).