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Pension and profit sharing: qualification.

Qualification Requirements

324. Starting Point--What are the advantages of a qualified pension, annuity, profit sharing, or stock bonus plan?

The term "qualified plan" means an employer retirement plan that meets the requirements to be tax favored under IRC Section 401. Section 401 not only provides for an extensive list of requirements for such treatment, incorporating a wide range of other Code sections, it also conveys highly favorable tax treatment on employer sponsors and covered employees and their beneficiaries when those requirements are satisfied. This section (Q 324 to Q 364) explains the requirements that apply to all qualified plans. Note that additional plan-specific qualification requirements (those that apply only to certain types of plans) are explained beginning at Q 371.

Assuming the qualification requirements set forth in the Internal Revenue Code are met, the following tax advantages are available for qualified plans: (1) The employer can take a current business expense deduction (within limits) for its contributions to the plan even though the employees are not currently taxed on these contributions (see Q 365 to Q 369); (2) An employee pays no tax until benefits are distributed regardless of whether he has a forfeitable or nonforfeitable right to the contributions made on his behalf (see Q 430); (3) Distributions meeting certain requirements may be eligible for rollover or special tax treatment (see Q 436 to Q 441, Q 446, Q 455); (4) Annuity and installment payments are taxable only as received (see Q 442 to Q 445, Q 447); (5) The fund within the plan earns and compounds income on a tax free basis (see Q 450); and (6) Certain small employers (i.e., with fewer than 100 employees earning compensation over $5,000 per year) may be able to claim a business tax credit equal to 50% of qualified startup costs of an eligible employer plan. The maximum credit is $1,000 per year, which may be taken for up to three years. (1)

The general qualification requirements that apply to all qualified plans are explained at Q 325 to Q 364. Plan-specific qualification requirements and deduction limits applicable to each type of plan are explained at Q 372 to Q 426. Self-employed persons (i.e., sole proprietors and partners-see Q 361) may participate in qualified plans as "employees." For special rules applicable to self-employed individuals, see Q 424 to Q 426.

325. What requirements must be met in order for a plan to be "qualified"?

The basic requirements that a plan must meet in order to gain the special tax advantages of a "qualified plan" are set forth in IRC Section 401(a). A plan that fails to meet these requirements, either on its face or in operation, is technically subject to disqualification; however, most plan qualification failures can be corrected through one of the voluntary correction programs collectively known as the Employee Plans Compliance Resolution System (EPCRS). (2)

To meet the basic qualification requirements of IRC Section 401(a), a plan must:

... be established in the United States by an employer for the benefit of employees or their beneficiaries (see Q 326);

... prohibit the use of plan assets for purposes other than the exclusive benefit of the employees or their beneficiaries until such time as all liabilities to employees and their beneficiaries have been satisfied (see Q 326);

... meet minimum age and service standards (see Q 327), and minimum coverage requirements (see Q 328);

... provide for contributions or benefits that are not discriminatory (see Q 329 to Q 333 in general, and Q 411 to Q 412 with respect to 401(k) plans);

... provide for contributions or benefits that do not exceed the IRC Section 415 limitations (see Q 335, Q 374, and Q 379);

... meet the minimum vesting standards (see Q 336 to Q 337);

... provide for distributions that satisfy both the commencement rules and the minimum distribution requirements (see Q 341 to Q 350);

... provide for automatic survivor benefits under certain circumstances (see Q 338 to Q 340);

... contain provisions that meet the requirements for "top-heavy" plans and provide that such provisions will become effective should the plan become top-heavy (see Q 353 to Q 355);

... prohibit the assignment or alienation of benefits (see Q 351 to Q 352);

... meet the miscellaneous requirements described in Q 356.

In addition, a plan, and its underlying trust, custodial account, annuity contract, or contract (other than a life, health or accident, property, casualty or liability insurance contract) issued by an insurance company, must meet certain other plan-specific qualification requirements, depending on the type of plan being used (e.g., profit sharing, etc.). See Q 371 to Q 425.

A plan must provide that if the distributee of an eligible rollover elects to have the distribution paid directly to an eligible plan, and specifies the plan, the distribution will be made in the form of a direct rollover, provided the distribution would have been includable in gross income if not rolled over. (1) However, after-tax amounts may be the subject of a direct rollover under certain circumstances, provided they are separately accounted for. (2) If the distributee does not elect to have the distribution made as a direct rollover, it will be subject to 20% income tax withholding. (3)

Generally, a plan must provide that if a distribution in excess of $1,000 and up to $5,000 is made, and the distributee does not elect to roll over or receive the distribution, the plan will transfer the distribution to an IRA established to receive the distribution. (4) This requirement took effect March 28, 2005; see Q 457 for details. The plan must also notify the distributee in writing of the rollover. (5)

In addition, the plan administrator must provide a written explanation to the distributee of his right to elect a direct rollover, and the withholding consequences of not making the election. (6) An updated safe harbor explanation that meets this requirement was provided in Notice 2002-3. (7) See Q 455 for an explanation of the rollover provisions for qualified plans.

A qualified plan sponsor may elect to maintain deemed IRAs for employees who wish to make voluntary traditional or Roth IRA contributions by means of payroll deduction. (8) See Q 212 for details.

The plan must be a definite funded written program and arrangement that is communicated to the employees. (1) The plan may be expressed in more than one writing or memorandum, but must embody all essential elements required by IRC Section 401(a) to be a "plan." It cannot be established retroactively. (2)

The assets of a custodial account must be held by a bank or other person who demonstrates to the satisfaction of the IRS that the manner in which he will hold the assets will be consistent with the requirements qualified plans must meet. An annuity contract must be nontransferable if issued after 1962. (3) The person holding the assets of the account or the contract is treated as the trustee thereof. (4) Thus, it is possible for a nontrusteed profit sharing plan funded solely with annuity contracts to qualify.

A trust must have economic reality. Thus, where trust assets were used as their own by the officers of the contributing corporation who were also the only trustees, beneficiaries and stockholders, the trust was held a nullity for tax purposes. (5) A qualified trust did not exist where participants had the right to hold, acquire and dispose of amounts attributable to their account balances at will. (6) If certain requirements are met, trusts that are part of qualified retirement plans or individual retirement accounts and government retirement plans (whether or not qualified and whether or not the assets of such government plans are held in trust) may pool their assets in a domestic group trust without affecting the qualified status of the individual trusts. (7)

Failure to timely amend a plan to meet newly enacted or modified qualification requirements can result in revocation of a plan's qualified status, even if the plan has been terminated. (8) (A terminated plan is subject to the qualification rules until such time as all the assets are distributed in satisfaction of its liabilities.) Courts have permitted amendments made after stipulated deadlines to be given retroactive effect where no circumstances have arisen that call into operation the objectionable provisions of the plan and where the employer exercised reasonable diligence in attempting to obtain a favorable determination. (9) "Reasonable diligence" was not exercised where application for a determination was not made for over 5 1/2 years after the enactment of TEFRA and over 3 1/2 years after TRA '84 and REA '84. (10)

Special rules applicable to collectively bargained plans are found in IRC Section 413. (11) For plans covering self-employed individuals, see also Q 424, Q 425, and Q 361.

Exclusive Benefit Rule

326. What is the "exclusive benefit rule" of plan qualification?

The plan must be established in the United States by an employer for the exclusive benefit of employees or their beneficiaries. (12)

A plan will not qualify if it includes participants who are not employees of the employer who established and maintains the plan (except in the case of "leased employees"; see Q 358). (1) Generally, an individual is an employee for the purpose of participating in a qualified plan if he is an employee under the "common law" rules (see Q 357); however, under IRC Section 3508 certain real estate agents and direct sellers of consumer products are specifically defined as non-employees. An individual is an employee under the common law rules if the person or organization for whom he performs services has the right to control and direct his work, not only as to the result to be accomplished, but also as to the details and means by which the result is accomplished. (2)

Self-employed individuals are eligible to participate in their own qualified plans under the same rules applicable to common law employees, but some special rules apply (see Q 361, Q 425). Generally, participation by independent contractors who are not employees of a corporation in the corporation's plan would be a violation of the exclusive benefit rule; however, the IRS has not been inclined to disqualify plans on this ground alone. (3)

Stockholders, even sole owners of corporations, who are bona fide employees of corporations (including professional corporations and associations and S corporations) are eligible to participate in a qualified plan of the corporation as regular employees, not as self-employed individuals. (4) A full-time life insurance salesperson who is an employee for Social Security purposes can participate in a qualified plan as a regular employee. (5) He cannot set up a plan as a self-employed individual. (6)

The primary purpose of benefiting employees or their beneficiaries must be maintained with respect to investment of trust funds as well as with respect to other activities of the trust. (7)

The use of the exclusive benefit rule to disqualify a plan where trust funds have been misappropriated generally occurs only under egregious circumstances. For example, where a plan loaned out almost all of its assets to the company president, without seeking adequate security, a fair return, or prompt repayment, the plan was held not to be operated for the exclusive benefit of the employees and the plan was disqualified. (8) Likewise, where a corporation's sole shareholder/ plan trustee caused the plan to make 22 unsecured loans to himself and none of the loans bore a reasonable rate of interest nor were adequately secured, the exclusive benefit rule was violated and the plan disqualified. (9)

However, a loan made by a plan to an employer from excess funds that would have ultimately been returned to the employer did not violate the exclusive benefit requirement (this was despite the imposition of the excise tax on prohibited transactions).10 The Tax Court has held that even a violation of the prudent investor rule (failure to diversify) did not rise to the level of a violation of the exclusive benefit rule. (11)

The IRS has stated that where an ESOP trust contained a provision permitting the trustee to consider nonfinancial, employment-related factors in evaluating tender offers for company stock, the exclusive benefit rule was violated. (1)

The garnishment of an individual's plan interest under the Federal Debt Collections Procedures Act (FDCPA) to pay a judgment for restitution or fines will not violate the exclusive benefit rule. (2)

No Reversion to Employer

Under the plan it must be impossible at any time prior to the satisfaction of all liabilities with respect to employees and their beneficiaries for any part of the funds to be used for or diverted to purposes other than for the exclusive benefit of the employees or their beneficiaries. (3)

As a rule, therefore, no sums may be refunded to the employer. However, a plan may provide for the return of a contribution (and any earnings) where (1) the contribution is conditioned on the initial qualification of the plan; (2) the plan receives an adverse determination with respect to its qualification, and (3) the application for determination is made within the time prescribed by law for filing the employer's return for the taxable year in which such plan was adopted or such later date as the Secretary of Treasury may prescribe. (4)

Furthermore, a plan may provide for return to the employer of contributions made by reason of a good faith mistake of fact and of contributions conditioned on deductibility where there has been a good faith mistake in determining deductibility. Earnings attributable to any excess contribution based on a good faith mistake may not be returned to the employer, but losses attributable to such contributions must reduce the amount returned. (5)

Employer contributions made to satisfy the quarterly contribution requirements (see Q 376) may revert to the employer if the contribution is conditioned on its deductibility, a requested letter ruling disallows the deduction, and the contribution is returned to the employer within one year from the date of the disallowance of the deduction. (6) Documentation must be provided showing that the contribution was conditioned on deductibility at the time it was made; board resolutions dated after the contribution is made are not sufficient. (7) A letter ruling request may not be needed if the employer contribution is less than $25,000 and certain other requirements are met. (8)

Also, if, upon termination of a pension plan (but not a profit sharing plan), all fixed and contingent liabilities to the employees and their beneficiaries have been satisfied, the employer may recover any surplus existing because of actuarial "error." (9) However, the plan must specifically provide for such a reversion. (10) Thus, where a plan had no such provision, the employer was required to distribute surplus assets to the former employees (or their surviving spouses) covered by the plan. (11) Furthermore, the calculation of the employees' share of residual assets must result in an equitable distribution before the surplus assets may revert to the employer. (12) An excise tax may apply to any employer reversion--see Q 451.

If a pension or annuity plan maintains a separate account that provides for the payment of medical benefits to retired employees, their spouses and their dependents, any amount remaining in such an account following the satisfaction of all liabilities to provide the benefits must be returned to the employer even though liabilities exist with respect to other portions of the plan. (1)

Minimum Participation and Coverage

327. What minimum "age and service" requirements apply to qualified plans?

A plan may not require, as a condition of participation in the plan, that an employee complete a period of service extending beyond the later of (a) age 21, or (b) the completion of one year of service or the completion of two years of service if the plan provides that after not more than two years of service each participant has a nonforfeitable right to 100% of his accrued benefit. In the case of a plan maintained exclusively for employees of a tax-exempt (under IRC Section 501(a)) educational institution, the minimum age limitation can be 26 instead of 21, but only if the plan provides that each participant having at least one year of service has a nonforfeitable right to 100% of his accrued benefit. (2) An additional minimum participation rule (i.e., the 50/40 test) applies to defined benefit plans only; see Q 373.) A plan generally may not exclude from participation in the plan employees who are beyond a specified age. (3)

A plan must provide that any employee who has satisfied the minimum age and service requirements specified above and who is otherwise entitled to participate in the plan is to commence participation in the plan no later than the earlier of (1) the first day of the first plan year beginning after the date on which the employee satisfied such requirements, or (2) the date six months after the date on which he satisfied such requirements, unless the employee was separated from service before the date referred to in (1) or (2), whichever is applicable. (4)

In a 2004 memorandum to its staff, the IRS expressed disapproval with plans that attempt to satisfy various Code requirements by limiting participation to highly compensated employees and to rank and file employees with very short periods of service. Such plans may be the subject of adverse rulings, or other action. (5)

The foregoing provisions do not require that the employee be eligible for plan participation merely because he satisfies the specified age and service requirements. Other requirements, not related to age or service, may be imposed by a plan as a condition of participation. (6) See Q 328. Nevertheless, if the effect of some other plan provision is to impose an additional age or service requirement, that provision will be treated as an age or service requirement even if it does not specifically refer to age or service. (7) The IRS has stated that the exclusion of part-time employees from plan participation will violate the participation rules under IRC Section 410(a), even if such an exclusion would otherwise satisfy IRC Section 410(b). (8)

The term "year of service" means a 12-month period, measured from the date the employee enters service, during which the employee has worked at least 1,000 hours; special rules apply where there are breaks in service and where there is absence from work due to pregnancy, childbirth, or adoption of a child. (1) Special rules also apply in the cases of seasonal industries and maritime industries. (2) The IRS has stated that the exclusion of part-time employees from plan participation may be considered discriminatory and, in any event, will violate the participation rules under IRC Section 410(a) as described above. (3)

Past service with former employers may be used for the purpose of determining eligibility to participate in a plan provided (1) the former employers are specified in the plan or trust, (2) all employees having such past service are treated uniformly, and (3) the use of such past service factor does not produce discrimination in favor of the highly compensated employees (see Q 329). (4) The IRS has also permitted individuals to be credited for services performed as partners or sole proprietors prior to becoming employees in a successor corporation for this purpose. (5)

328. What is the "minimum coverage" requirement for qualified plans?

A qualified plan must meet the minimum coverage test set forth in IRC Section 410(b) and regulations thereunder. (6) Under these provisions, a plan must satisfy either a ratio percentage test or an average benefit test. Governmental plans (whether maintained by a state or local government, or the United States government) are exempt from this requirement and the regulations implementing it. (7) Section 401(k) plans are subject to certain modifications of the coverage requirements; see Q 398.

A plan will not be treated as violating the coverage requirements of Section 410(b) merely on account of the making of (or right to make) catch-up contributions by participants age 50 or over, under the provisions of IRC Section 414(v), so long as a universal availability requirement is met. (8) See Q 400 for details on the requirements for catch-up contributions.

Ratio Percentage Test

The Code states that a qualified plan must benefit either (a) 70% of all nonhighly compensated employees, (i.e., the percentage test) or (b) a percentage of the nonhighly compensated employees that is at least 70% of the percentage of highly compensated employees benefiting under the plan (i.e., the ratio test). (9) Regulations incorporate these two tests into a ratio percentage test, which requires that the plan's ratio percentage for the plan year be at least 70%. (10) A plan's ratio percentage is determined by dividing the percentage of the nonhighly compensated employees who benefit under the plan by the percentage of the highly compensated employees who benefit under the plan. (11)

Example: Rayford Steel Company has a profit sharing plan that covers 90 of its 100 nonexcludable highly compensated employees and 130 of its 200 nonexcludable nonhighly compensated employees. The plan's ratio percentage is determined by dividing (a) the percentage of the nonhighly compensated employees who benefit under the plan (130/200, or 65%) by (b) the percentage of the highly compensated employees who benefit under the plan (90/100, or 90%). Rayford Steel's ratio percentage is 65/90, or 72.22%; thus, it passes the ratio percentage test.

Average Benefit Test

A plan that cannot satisfy the ratio percentage test may still pass the coverage requirement by satisfying the average benefit test. The average benefits test has two parts: (a) the "nondiscriminatory classification" test, and (b) the "average benefit percentage" test. Both of these requirements must be met for a plan to satisfy the average benefit test. (1)

Nondiscriminatory classification test. In order to pass the nondiscriminatory classification test, the Code states that a plan must benefit "such employees as qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of highly compensated employees." (2) Regulations state that this test has two subparts: (1) the classification of employees must be reasonable; it must reflect a bona fide business classification of employees (3) and (2) the classification must be nondiscriminatory, based on a facts and circumstances test or a safe harbor percentage test as explained below (4)

To determine whether a classification is nondiscriminatory, the plan's ratio percentage (as defined above) is compared to a table (described below) that is set forth in the regulations. This comparison produces one of three results: (1) if the plan's ratio percentage falls below the unsafe harbor percentage, it is discriminatory; (2) if the plan's ratio percentage falls between the safe harbor and unsafe harbor amounts, it must satisfy a facts and circumstances test; or (3) if the plan's ratio percentage falls at or above the safe harbor amount, the plan is nondiscriminatory. (5)

The regulations contain a table setting forth a safe harbor percentage and an unsafe harbor percentage for every nonhighly compensated employee concentration level. (6) The table begins with a nonhighly compensated employee concentration of zero to 60%, and for that level provides a safe harbor percentage of 50% and an unsafe harbor percentage of 40%. In other words, for an employer with 100 employees, of whom 40 are highly compensated and only 60 are nonhighly compensated, the classification would automatically be nondiscriminatory under the safe harbor if its ratio percentage were 50% or higher.

The safe harbor percentage is reduced by 3/4 of a percentage point (but not below 20.75%) for each whole percentage point by which the nonhighly compensated employee concentration percentage exceeds 60%.Thus, for an employer with a nonhighly compensated employee concentration percentage of 99%, the safe harbor percentage would be 20.75%. (7)

The unsafe harbor percentage is reduced by 3/4 of a percentage point (but not below 20%) for every whole percentage point by which the nonhighly compensated employee concentration percentage exceeds 60%. (8)

Example. Omega Corporation has 200 nonexcludable employees, of whom 120 are nonhighly compensated and 80 are highly compensated employees. Omega maintains a plan that benefits 60 nonhighly compensated employees and 72 highly compensated employees. Thus, the plan's ratio percentage is 55.56% ([60/120]/[72/80] = 50%/90% = 0.5556), which is below the percentage necessary to satisfy the ratio percentage test described above. Omega's nonhighly compensated employee concentration percentage is 60% (120/200); thus, Omega's safe harbor percentage is 50% and its unsafe harbor percentage is 40%. Because the plan's ratio percentage (55.56%) is greater than the safe harbor percentage (50%), the plan's classification satisfies the safe harbor.

Average benefit percentage test. The second part of the average benefit test requires that the average benefit percentage for nonhighly compensated employees be at least 70% of the average benefit percentage for highly compensated employees. (1)

An employee's benefit percentage is his employer-provided contributions (including forfeitures and elective deferrals) or benefits under all qualified plans maintained by the employer, expressed as a percentage of his compensation. (2) Employee contributions and benefits attributable to employee contributions are not taken into account in calculating employee benefit percentages. (3) Regulations permit benefit percentages to be determined on either a contributions or a benefits basis, but the benefit percentages for any testing period must be determined in the same manner for all plans in the testing group. (4)

The average benefit percentage means the average of the benefit percentages calculated separately with regard to each employee in the group. (5) An employer may not disregard any qualified plan in determining benefit percentages, even if the plan satisfies the percentage test or ratio test standing alone; however, an employer who maintains separate lines of business (see below) may test those businesses separately. The benefit percentage for any plan year is computed on the basis of contributions or benefits for that year or, at the election of the employer, any consecutive plan year period (up to three years) ending with the plan year and specified in the election. An election under this provision cannot be revoked or modified without the consent of the Secretary of the Treasury. (6)

A plan maintained by an employer that has no employees other than highly compensated employees for any year or that benefits no highly compensated active employees for any year is treated as meeting the minimum coverage requirements. (7)

Miscellaneous Rules

Separate lines of business. An employer who operates "separate lines of business" may apply the above tests separately with respect to employees in each line of business, so long as any such plan benefits a class of employees that is determined, on a company wide basis, not to be discriminatory in favor of highly compensated employees. (8) A separate line of business exists if the employer, for bona fide business reasons, maintains separate lines of business or operating units. A separate line of business, however, cannot have less than 50 employees (disregarding any employees excluded from the top-paid group when determining which employees are highly compensated-see Q 359). A separate line of business must also either meet a statutory safe harbor (with regard to ratios of highly compensated employees) provided in the Code, meet one of the administrative safe harbors provided in final regulations, or request and receive an individual determination from the IRS that the separate line of business satisfies administrative scrutiny. (9)

Former employees. Active and former employees are tested separately for purposes of these rules. (10) A plan satisfies the coverage requirement with respect to former employees only if, under all the relevant facts and circumstances, the group of former employees does not discriminate significantly in favor of highly compensated former employees. (11)

Excludable employees. Employees who can be excluded from consideration in meeting the coverage tests generally include (1) employees covered by a collective bargaining agreement (provided that retirement benefits were the subject of good faith bargaining between the employee representatives and the employer), and (2) nonresident aliens who receive no U.S. earned income. (1) Although a plan may permit an otherwise eligible employee to waive his right to participate, such a waiver may, under some circumstances, result in discriminatory coverage. (2) Generally, employees who have not satisfied the plan's minimum age and service requirements may also be excluded from consideration in meeting the above tests, but only if all such employees are excluded. (3) However, for purposes of the average benefit percentage component, the employer can exclude only those employees who have not satisfied the lowest minimum age and service requirements for any plan taken into account. (4)

If a plan applies minimum age and service eligibility conditions that are permissible under IRC Section 410(a)(1) and excludes all employees who do not satisfy those conditions, then all employees who fail to satisfy those requirements are excludable employees with respect to that plan. However, such an employee may be treated as an excludable employee if he terminates employment with not more than 500 hours of service. (5) An employee is treated as meeting the age and service requirements on the date any employee with the same age and service would be eligible to commence participation in the plan. (6)

Employees treated as benefiting. Generally, for purposes of meeting the above tests, an employee "benefits" under a plan for a year only if the employee accrues a benefit or receives an allocation under the plan for that year. However, in the case of a 401(k) plan, any individual who is eligible to make elective deferrals is treated as benefiting under the plan. (7) (Of course, for purposes of meeting the average benefit percentage part of the average benefit test, only actual benefits, rather than mere eligibility, are taken into account.) (8) An employee is treated as "benefiting" under a plan for a plan year if the employee satisfies all of the applicable conditions for accruing a benefit for such a year but fails to accrue a benefit solely because of the IRC Section 415 limits or some other uniformly applicable plan benefit limit. (9)

Mandatory disaggregation. Some plans or portions of plans must be disaggregated for purposes of meeting the minimum coverage rules. The mandatory disaggregation requirement specifies that certain single plans must be treated as comprising separate plans, each of which is subject to the minimum coverage requirements.

Some of the plans that generally have to be disaggregated for coverage purposes are: (1) the portion of a plan that includes a cash or deferred arrangement subject to IRC Section 401(k) (or matching and employee after-tax contributions subject to IRC Section 401(m)) and the portion that does not; (2) the portion of a plan that is an ESOP and the portion that is a non-ESOP (note that this varies from the proposed disaggregation rules that would apply under proposed regulations for ADP/ ACP testing purposes only; (10) see Q 411, Q 412); (3) the portion of a plan that benefits otherwise excludable employees and the portion that does not, (4) a plan that benefits the employees of a separate line of business and any plan maintained by any other line of business if the employer elects to use the separate line of business rules, and (5) the portion of a plan that benefits employees under a collective bargaining arrangement and the portion that benefits nonunion employees. (1) For testing the benefits of employees who change from one qualified separate line of business to another, a "reasonable" treatment must be used. (2) A multiple employer plan is also treated as comprising separate plans each of which is maintained by a separate employer and must generally satisfy the minimum coverage requirements by reference only to such employer's employees. (3)

Permissive aggregation. For purposes of applying the ratio percentage test and the nondiscriminatory classification test, an employer may elect to designate two or more of its plans as a single plan, but only if the plans have the same plan years. (4) If plans are aggregated under this rule, such plans must be treated as a single plan for all purposes under IRC Sections 410(b) and 401(a)(4). (5) (Of course, plans that are required to be disaggregated under the rules described above cannot be aggregated under this rule.) Furthermore, for purposes of applying these tests, the following plans must also be disaggregated: (1) the portion of a plan that is an ESOP and the portion that is a non-ESOP, and (2) the portion of a plan that includes a cash or deferred arrangement subject to IRC Section 401(k) (or matching and employee after-tax contributions subject to IRC Section 401(m)) and the portion that does not. (6)

For purposes of applying the average benefit percentage test, all plans that may be aggregated under the permissive aggregation rules must be aggregated and treated as a single plan. In addition, plans (or portions of plans) that are ESOPs or that are subject to IRC Section 401(k) or 401(m) must also be aggregated with all other qualified plans of the employer. (7) A special rule in the final regulations permits benefits provided to collectively bargained employees and noncollectively bargained employees to be considered together, for purposes of the average benefit percentage test only, if certain requirements are met. (8)

Snapshot testing. The Code states that a plan will be considered as meeting the minimum coverage requirement during the whole of any taxable year of the plan if on one day in each quarter it satisfied such requirement. (9) However, employers may demonstrate compliance with the coverage requirement using "snapshot" testing on a single day during the plan year, provided that day is representative of the employer's work force and the plan's coverage throughout the plan year. (10)

Corrective amendments. A plan that does not satisfy the minimum coverage requirement during a plan year may be retroactively amended by the fifteenth day of the tenth month after the close of the plan year to satisfy one of the tests. (11) Any retroactive amendments must separately satisfy the nondiscrimination and minimum coverage requirements, and cannot violate the anti-cutback rule of IRC Section 411(d)(6) (see Q 331, Q 337). (12)

Merger or acquisition. The Code provides certain transition relief from the coverage rules in the event of a merger or acquisition. (13) The IRS has provided guidance for certain changes in plan sponsors' controlled group, offering temporary relief from the coverage requirements, provided that (1) each plan satisfied the coverage requirements prior to the change in the controlled group, and (2) no significant change in the plan or its coverage takes place during the transition period (other than the change resulting from the merger or acquisition itself). (1)

Effect of noncompliance. Special rules apply to a plan that fails to qualify solely because it does not meet one of the coverage tests. In such a case, contributions on behalf of nonhighly compensated employees will not be taxed under the rules for nonqualified plans. (Presumably, all other complications arising from plan disqualification would apply.) Instead, highly compensated employees will be required to include in income the amount of their vested accrued benefits (other than their investment in the contract). (2)

The minimum coverage requirement is generally inapplicable to church plans, and governmental plans are treated as meeting the coverage provisions. (3) The coverage regulations generally apply to tax-exempt organizations; however, noncontributory plans maintained by certain tax-exempt organizations (a society, order or association described in IRC Sections 501(c)(8) or 501(c)(9)) are not subject to the coverage requirements. (4)

Plan for sole shareholder. A corporation may have a qualified plan even though it has only one permanent employee and that employee owns all the stock of the corporation. But if the plan is either designed or operated so that only the shareholder-employee can ever benefit, it will not qualify. Provision must be made for participation of future employees if any are hired. (5) A pension plan will not fail to qualify merely because it is established by a corporation that is operated for the purpose of selling the services, abilities or talents of its only employee who is also its principal or sole shareholder. (6) However, the plan of a corporation's sole shareholder was disqualified for violating the coverage requirement after it was shown that the only two hired personnel of the company, who had been excluded from the plan as independent contractors, were in fact employees. (7)

As to which individuals must be treated as "employees" and what organizations make up an employer, see Q 357, Q 358, Q 362, and Q 363.

Nondiscrimination

329. What are the requirements a plan must meet to be nondiscriminatory?

There are three basic requirements a plan must meet in order to be considered nondiscrimina tory under IRC Section 401(a)(4):

(1) contributions or benefits must not discriminate in favor of "highly compensated employees" (defined in IRC Section 414(q)-see Q 359), as described below;

(2) benefits, rights and features provided under the plan must be made available to employees in a nondiscriminatory manner (see Q 330); and

(3) the effect of plan amendments (including grants of past service credit) and plan terminations must be nondiscriminatory (see Q 331). (8)

Employees not included in the plan but who are covered by a collective bargaining agreement can be excluded from consideration in meeting the nondiscrimination requirement if there is evidence that retirement benefits were the subject of good faith bargaining between the employee representatives and the employer. But, if the union employees are covered under the plan, benefits or contributions must be provided for them on a nondiscriminatory basis. Nonresident aliens with no U.S. earned income may also be excluded. (1)

Governmental plans generally are not subject to the requirements of IRC Section 401(a)(4). (2) For plan years beginning prior to August 18, 2006, this provision applied only to state and local government plans, but plans maintained by the government of the United States or by any agency or instrumentality of it and nonelecting church plans were subject to a reasonable, good faith standard as to the nondiscrimination regulations. (3)

The regulations under IRC Section 401(a)(4) provide the exclusive rules for determining whether a plan satisfies the nondiscrimination requirements of IRC Section 401(a)(4). (4) The requirement that a plan provide nondiscriminatory contributions or benefits is in the alternative; it is not required that both contributions and benefits be nondiscriminatory. A plan may satisfy this requirement on the basis of either contributions or benefits, regardless of whether the plan is a defined benefit plan or a defined contribution plan. The process of testing defined benefit plans on the basis of contributions or defined contribution plans on the basis of benefits is referred to as cross testing (see Q 332).

A plan will not be considered discriminatory merely because contributions or benefits bear a uniform relationship to the employees' compensation. (5) ("Compensation" is defined in Q 334.) A plan will satisfy IRC Section 401(a)(4) only if it complies both in form and in actual operation with the regulations explained below. In making this determination, intent is irrelevant. (6)

A plan also will not be treated as discriminatory merely on account of the making of (or right to make) catch-up contributions by participants 50 or over, under the provisions of IRC Section 414(v), so long as a universal availability requirement is met. (7) See Q 400 for details on the requirements for catch-up contributions.

There are two basic options for ascertaining that a plan provides nondiscriminatory contributions or benefits: design the plan to meet one of the safe harbors, or pass the general test on an annual basis. Plans that do not meet the requirements for one of the safe harbors must use the general test. The safe harbor methods are design-based; essentially, they require the plan to have uniformity provisions that reduce the risk of discrimination, so that annual testing is unnecessary. As a result, the safe harbors are simpler and less costly to apply than the general test, which focuses on actual plan results and requires annual review.

Defined contribution safe harbors. The regulations set forth two safe harbor designs for defined contribution plans. Neither of the safe harbors allows the use of permitted disparity. Under the first safe harbor, referred to as a uniform allocation formula, a defined contribution plan will be nondiscriminatory if it allocates employer contributions and forfeitures for the year under an allocation formula that allocates to each employee (1) the same percentage of plan year compensation, (2) the same dollar amount, or (3) the same dollar amount for each uniform unit of service (not exceeding one week) performed by the employee during the year. (8)

The second safe harbor design is referred to as a uniform points allocation formula. Such a formula allows a defined contribution plan (other than an ESOP) to be nondiscriminatory even though contributions are weighted for age and/or service, as well as for compensation. (1)

The use of either of these safe harbors is not precluded by a plan that has nonuniform benefits if the sole reason for the nonuniformity is that the plan provides lower benefits to highly compensated employees than to other employees. (2)

General test for defined contribution plans. Defined contribution plans (other than plans subject to IRC Section 401(k) or 401(m)) that do not satisfy one of the safe harbors generally will meet the "nondiscrimination in amount" requirement only if each "rate group" satisfies the minimum coverage requirements of IRC Section 410(b). For this purpose, a "rate group" exists for each highly compensated employee in the plan, and consists of the highly compensated employee (HCE) and all other employees in the plan (whether highly compensated or nonhighly compensated) who have an allocation rate greater than or equal to the highly compensated employee's allocation rate. In other words, each employee, regardless of compensation level, is in the rate group for every HCE who has an allocation rate less than or equal to that employee's allocation rate. (3)

Defined benefit safe harbors. The final regulations provide a set of uniformity requirements that apply to all of the defined benefit safe harbors. Generally, the plan must provide a uniform normal retirement benefit in the same form for all employees, using a uniform normal retirement age. For purposes of this requirement, Social Security retirement age will be treated as a uniform retirement age. (4) The regulations provide for three safe harbors: one for unit credit plans, one for fractional accrual plans (including flat benefit plans), and one for insurance contract plans. (5)

General test for defined benefit plans. Defined benefit plans that do not satisfy any of the safe harbors will satisfy the "nondiscriminatory in amount" requirement only if they satisfy the general test, which requires the calculation of accrual rates and an analysis of their distribution. The general test will be satisfied if each "rate group" satisfies the minimum coverage requirements of IRC Section 410(b). For this purpose, a "rate group" exists for each highly compensated employee in the plan, and consists of the highly compensated employee and all other employees in the plan (whether highly compensated or nonhighly compensated) who have a normal accrual rate greater than or equal to the highly compensated employee's normal accrual rate, and who also have a most valuable accrual rate greater than or equal to the highly compensated employee's most valuable accrual rate. In other words, an employee is in the rate group for each highly compensated employee who has a normal accrual rate less than or equal to the employee's normal accrual rate and who also has a most valuable accrual rate less than or equal to the employee's most valuable accrual rate. (6)

The regulations provide a facts and circumstances "safety valve" for certain defined benefit plans that would pass the general test if no more than 5% of the highly compensated employees were disregarded. If the IRS determines on the basis of all the relevant facts and circumstances that such a plan does not discriminate with respect to the amount of employer-provided benefits, the plan will pass the general test. (For purposes of calculating the 5%, the number of highly compensated employees may be rounded to the nearest whole number.) (7)

Target plan benefits. The regulations provide a safe harbor testing method for target benefit plans. Because target benefit plans are defined contribution plans that determine allocations based on a defined benefit funding approach, the safe harbor is included in the rules for cross testing.

Generally, a target benefit plan will be deemed to meet the "nondiscrimination in amount" requirement if: (1) it satisfies uniformity requirements with respect to normal retirement age and allocation formula (Social Security retirement age will be treated as a uniform retirement age; (1) (2) it provides a stated benefit formula that complies with one of the defined benefit plan safe harbors that uses the fractional accrual rule; (3) employer contributions are determined under an individual level premium funding method specified in the regulations, based on an employee's stated benefit and "theoretical reserve"; (4) employee contributions (if any) are not used to fund the stated benefit; and (5) the stated benefit formula satisfies Treas. Reg. [section] 1.401(1)-3, if permitted disparity is taken into account. (2)

401(k) plans. Special nondiscrimination tests and design-based safe harbors apply in the case of contributions to 401(k) and 401(m) plans (see Q 411 to Q 413). (3)

Short service employees. The IRS released guidance late in 2004 expressing disapproval with plans that attempt to satisfy the nondiscrimination requirements by limiting participation to highly compensated employees and to rank and file employees with very short periods of service. The Service noted that sponsors of such plans use "plan designs and hiring practices that limit the nonhighly compensated employees who accrue benefits under the plan primarily to employees with very small amounts of compensation" and that most such employees never vest in their benefits. Such plans may be the subject of adverse rulings, or other action. (4)

Aggregation and restructuring. Under certain circumstances, a plan may be aggregated (combined) with other plans or restructured (treated as two or more separate plans) for purposes of meeting the nondiscrimination in amount requirement. Where plans are restructured, each component plan must separately satisfy the nondiscrimination requirements and the coverage requirements (see Q 328). (5)

If two or more plans are permissively aggregated and treated as constituting a single plan for purposes of satisfying the minimum coverage requirements (see Q 328), the aggregated plans must also be treated as a single plan for purposes of meeting the nondiscrimination requirements. (6) The regulations include guidelines for determining whether several such plans, when considered as a unit, provide contributions and benefits that discriminate in favor of highly compensated employees. A disability plan that is not a pension, profit sharing, stock bonus or annuity plan may not be aggregated with such plans for this purpose. (7) Special rules are provided for applying the nondiscrimination requirements to an aggregated plan that includes both a defined benefit plan and a defined contribution plan. (8) Special rules apply where an aggregated plan includes a new comparability plan.9 See Q 332.

Integrated plans. An integrated defined benefit plan will not be considered discriminatory merely because the plan is integrated with Social Security (i.e., the plan uses the permitted disparity rules). (10) A number of the safe harbor defined benefit plan designs provided in the nondiscrimination regulations allow permitted disparity to be used; however, a defined contribution plan must pass the general test in order to use permitted disparity. For details on Social Security integration, see Q 333.

Substantiation. Employers may demonstrate compliance with the "nondiscrimination in amount" requirement by using "snapshot" testing on a single day during the plan year, provided that day is representative of the employer's work force and the plan's coverage throughout the plan year. (1)

Past service credits. The effect of plan provisions with respect to grants of past service must be nondiscriminatory. The determination of whether credit for past service causes discrimination is made on a facts and circumstances basis. A plan provision that credits pre-participation service or imputed service to any highly compensated employee will be considered nondiscriminatory if, based on all the facts and circumstances: (1) the provision applies on the same terms to all similarly-situated nonhighly compensated employees, (2) there is a legitimate business purpose for crediting the service, and (3) the crediting of the service does not discriminate significantly in favor of highly compensated employees. (2) For an explanation of the nondiscrimination requirements for plan amendments granting past service credit, see Q 331.

Twenty-five highest paid HCEs. A plan must provide certain restrictions limiting the benefits that can be paid to the 25 highest paid highly compensated employees. Essentially, this rule places limitations on the availability of a lump sum payment to such employees, unless plan assets exceed a certain percentage of liabilities, or the value of the benefit paid to the restricted employee is negligible, or the value of the benefit does not exceed $5,000. (3) The IRS has determined that this requirement was met where a bond or a letter of credit secured repayment of the restricted amount by a rollover IRA.4 The termination of escrow arrangements established in connection with these provisions was permitted in private rulings. (5) Guidelines for nondiscriminatory allocation of assets on termination of a defined benefit plan are set forth in Rev. Rul. 80-229. (6)

As to what individuals must be treated as "employees" and what organizations make up an employer, see Q 357, Q 358, Q 362, and Q 363.

330. What are the requirements with respect to nondiscriminatory availability of plan benefits, rights, and features?

The benefits, rights, and features provided under a plan (i.e., all optional forms of benefit, ancillary benefits, and other rights and features available to any employee under the plan) must be made available in a nondiscriminatory manner. Benefits, rights, and features generally will meet this requirement only if each benefit, right, and feature satisfies a "current availability" requirement and an "effective availability" requirement. (7)

Generally, the current availability requirement is satisfied if the group of employees to whom the benefit, right or feature is currently available during the plan year satisfies the minimum coverage test (see Q 328) without regard to the average benefit percentage test. (8)

Current availability is based on the current facts and circumstances of the employee; the fact that an employee may, in the future, satisfy an eligibility condition does not make the benefit option currently available to that employee. But conditions based on termination of employment, disability, or hardship, or conditions based on age or length of service (other than those that must be satisfied within a specified period of time) may be disregarded in determining current availability. (1)

In order to satisfy the effective availability requirement, the group of employees to whom a benefit, right, or feature is effectively available must not, based on all the facts and circumstances, substantially favor highly compensated employees. (2) Thus, for example, a matching contribution that is available only to employees deferring a relatively high percentage of income would fail this requirement if the level of deferral required makes the match effectively unavailable to most nonhighly compensated employees.

A plan that offers catch-up contributions will not be treated as violating these requirements merely on account of the making of (or right to make) catch-up contributions by participants 50 or over, under the provisions of IRC Section 414(v), so long as a universal availability requirement is met. (3) See Q 400 for details.

The IRS has issued guidance under which two optional forms of benefit that differ only with respect to the timing of their commencement generally may be aggregated and treated as a single optional form of benefit solely for purposes of satisfying the nondiscriminatory current and effective availability requirements. (4) Thus, for example, a preretirement age 70 1/2 distribution option that is available only to 5% owners (as required under IRC Section 401(a)(9), see Q 343) may be aggregated with another optional form of benefit that differs only in the timing of the commencement of payments, provided certain requirements are met. (5)

Generally, the fact that subsidized early retirement benefits and joint and survivor annuities are based on an employee's Social Security retirement age will not result in their being treated as unavailable to employees on the same terms. (6)

Employers may substantiate compliance with the current availability requirement by using "snapshot" testing on a single day during the plan year, provided that day is representative of the employer's work force and the plan's coverage throughout the plan year. (7) For additional guidelines on substantiating nondiscrimination in the amount of benefits, rights, and features. (8)

The IRS determined that where a plan, in operation, permitted highly compensated employees to direct their own investments, which resulted in their earning a substantially higher return than that earned on contributions by rank and file employees, the plan violated IRC Section 401(a)(4). The Service commented that even if their investment decisions had resulted in a lower return or a loss, the opportunity for the highly compensated employees to make their own investment decisions would still result in discrimination. (9)

331. What are the nondiscrimination requirements a plan must meet with respect to plan amendments and terminations?

The timing of plan amendments must not have the effect of discriminating significantly in favor of highly compensated employees. (1) For this purpose, a plan amendment includes the establishment or termination of the plan, as well as any change in the benefits, rights, or features, the benefit formulas, or the allocation formulas under the plan. (2)

The regulations provide a facts and circumstances test for determining whether a plan amendment or series of amendments has the effect of discriminating significantly in favor of highly compensated employees, or former highly compensated employees. (3)

The timing of a plan amendment that grants past service credit (or increases benefits attributable to years of service for a period in the past) will be deemed to be nondiscriminatory if the following four safe harbor requirements are met: (1) the period for which the credit is granted does not exceed the five years preceding the current year, (2) the past service credit is granted on a reasonably uniform basis to all employees, (3) benefits attributable to the period are determined by applying the current plan formula, and (4) the service credited is service (including pre-participation or imputed service) with the employer or a previous employer. (4) See Q 329 regarding plan provisions that credit pre-participation service or imputed service to any highly compensated employee.

Guidelines for nondiscriminatory allocation of assets on termination of a defined benefit plan are set forth in Revenue Ruling 80-229. (5)

332. What are the requirements for cross tested plans?

Cross testing is the process by which defined contribution plans are tested for nondiscrimination on the basis of benefits and defined benefit plans on the basis of contributions. Since cross testing generally results in higher contribution rates for older employees, such plans are sometimes referred to as "age weighted." (But age weighting is also available without cross testing, under a uniform points allocation formula safe harbor for defined contribution plans. (6)) The general rules for converting allocations under a defined contribution plan to equivalent benefits and for converting benefits under a defined benefit plan to equivalent allocation rates are explained at Treasury Regulation [section] 1.401(a)(4)-8.

The most common form of cross testing is "new comparability" testing of profit sharing plans. The new comparability feature uses cross testing to show that contributions under the plan provide nondiscriminatory benefits. Cross testing can also involve aggregating a defined benefit plan with a defined contribution plan, and testing the plans together on the basis of the benefits they provide.

Final regulations set forth three testing alternatives under which a cross tested defined contribution plan can satisfy the nondiscrimination in amount requirement, as well as rules for testing the combination of a defined benefit plan and a defined contribution plan on a benefits basis.

(1) Minimum allocation gateway. The minimum allocation gateway test sets forth two standards for new comparability plans. First, if the allocation rate for each nonhighly compensated employee (NHCE) in the plan is at least one-third of the allocation rate of the highly compensated employee (HCE) with the highest allocation rate under the plan, the gateway will be satisfied. In the alternative, if the allocation rate for each NHCE is at least 5% of his compensation (within the meaning of IRC Section 415(c)(3); see Q 334), the gateway will be satisfied. (7) The gateway is deemed satisfied if each NHCE receives an allocation of at least 5% of the NHCE's compensation, based on the plan year compensation. (1)

(2) Broadly available allocation rates. A new comparability plan need not satisfy the minimum allocation gateway if it provides for "broadly available allocation rates." To be broadly available, each allocation rate must be currently available to a group of employees that satisfies IRC Section 410(b), without regard to the average benefit percentage test (see Q 328). (2) Final regulations liberalized this determination somewhat by allowing groups receiving two different allocation rates to be aggregated for purposes of determining whether allocation rates are "broadly available." Thus, for example, a group receiving a 3% allocation rate could be aggregated with a group receiving a 10% allocation rate if each group passes the coverage test (not counting the average benefit percentage test). (3) Differences in allocation rates resulting from permitted disparity under the Section 1.401(1) regulations may be disregarded. (4)

For purposes of the "broadly available" test, certain transition allocations may be disregarded. (5)

(3) Age-based allocation rates. A plan that provides for age-based allocation rates will also be excepted from the minimum allocation gateway if it has a "gradual age or service schedule." A plan has a gradual age or service schedule if the allocation formula for all employees under the plan provides for a single schedule of allocation rates that (i) defines a series of bands based solely on age, years of service, or points representing the sum of the two that applies to all employees whose age, years of service, or points are within each band; and (ii) the allocation rates under the schedule increase smoothly at regular intervals (as defined in the regulations). Sample schedules of smoothly-increasing allocation schedules, based on the sum of age and service, are included in the final regulations. (6) Certain plans that fail the safe harbor for target benefit plans (7) may also satisfy the requirements for age-based allocation rates if the plan's allocation rates are based on a uniform target benefit allocation. (8)

Combination of defined benefit/defined contribution plans. A defined benefit plan, benefitting primarily HCEs, may be aggregated with a defined contribution plan benefitting primarily NHCEs, if a gateway similar to the one described above is met. (9) In the alternative, if the combined plan is "primarily defined benefit in character" or consists of "broadly available separate plans," as defined in regulations, it may be nondiscriminatory without satisfying the gateway. (10)

The IRS released guidance late in 2004 expressing disapproval with plans that attempt to satisfy the nondiscrimination requirements by limiting participation to highly compensated employees and to rank and file employees with very short periods of service. By way of example, the Service stated that a plan cross tested under the forgoing provisions violates the nondiscrimination requirements of IRC Section 401(a)(4) (see Q 329) where (1) the plan excludes most or all permanent NHCEs, (2) the plan covers a group of NHCEs who were hired temporarily for short periods of time, (3) the plan allocates a higher percentage of compensation to the accounts of the HCEs than to those of the NHCEs covered by the plan, and (4) compensation earned by the NHCEs covered by the plan is significantly less than the compensation earned by the NHCEs not covered by the plan. (11)

333. What is permitted disparity? How does it work?

The permitted disparity (Social Security integration) rules are an exception to the general nondiscrimination requirement, based on the premise that most employers pay Social Security tax, and thus help to fund a greater portion of the replacement income of lower paid workers. The rules under IRC Section 401(1) permit a plan to take this disparity into consideration, so that when retirement benefits under both the plan and Social Security are taken into account, a uniform percentage of compensation is provided to all workers.

An integrated plan will not be considered discriminatory merely because plan contributions or benefits favor the highly compensated employees if certain disparity limits are met. (1) If the requirements of IRC Section 401(1) are met, the disparity (or the benefit offset in an offset plan, see below) will be disregarded in determining whether the plan satisfies the nondiscrimination rules in Q 329. (2) The regulations under IRC Section 401(1) provide the exclusive means for a plan to satisfy IRC Sections 401(1) and 401(a)(5)(C). (3)

Disparity is not permitted with respect to: (1) ESOPs, (2) elective contributions under a qualified cash or deferred arrangement, or employee or matching contributions as defined in IRC Sections 401(k) and 401(m) (see Q 398 to Q 410); or (3) certain government plans that are not subject to the Federal Insurance Contributions Act (FICA) or the Railroad Retirement Tax Act. (4)

Defined Contribution Plans

A defined contribution plan may provide for disparity in the rates of employer contributions allocated to employees' accounts if it meets all of the following requirements:

1. The plan must be a defined contribution excess plan (i.e., a defined contribution plan under which the rate of allocations above the integration level is greater than the rate of allocations at or below the integration level). (5)

2. The disparity must not exceed the maximum excess allowance. The maximum excess allowance is the lesser of (1) the base contribution percentage, or (2) the greater of (i) 5.7 percentage points, or (ii) the percentage equal to the portion of the rate of Social Security tax (in effect for the year) attributable to old-age insurance. (6) (The IRS will publish the percentage rate of the portion attributable to old-age insurance when it exceeds 5.7%.) (7)

3. The plan must satisfy the overall permitted disparity limits described below. (8)

4. The disparity for all employees under the plan must be uniform. To be uniform the plan must use the same base contribution percentage and excess contribution percentage for all employees in the plan. (9) The "excess contribution percentage" is the percentage of an employee's compensation contributed to the plan that is attributable to compensation in excess of the "integration level."The "base contribution percentage" is the percentage of an employee's compensation that is contributed to the plan and that is attributable to compensation not in excess of the integration level. (10)

5. The integration level must be equal to the taxable wage base in effect as of the beginning of the plan year, or, if lower, must satisfy one of two alternative tests. (1) The "integration level" is the amount of compensation specified under the plan at or below which the rate of contributions (expressed as a percentage) is less than the rate of contribution above such level. (2)

Special rules apply to target benefit plans. (3) See Q 329. Cash balance plans (see Q 375) that meet the safe harbor requirements provided in final regulations under IRC Section 401(a)(4) may satisfy the permitted disparity rules on the basis of the defined contribution plan rules. (4)

Defined Benefit Plans

A defined benefit plan will not be considered discriminatory merely because the plan provides that a participant's retirement benefit may not exceed the excess of (1) the participant's final pay with the employer, over (2) the retirement benefit, under Social Security law, derived from employer contributions attributable to service by the participant with the employer. (5) The participant's final pay is the highest compensation paid to the participant (by the employer) for any year that ends during the 5-year period ending with the year in which the participant separated from service. (6) Compensation in excess of $245,000 (in 2010; see Appendix E for earlier years), may not be taken into account. (7)

A defined benefit plan may provide for disparity in the rates of employer-provided benefits if it meets all of the following requirements:

1. The plan must be a defined benefit excess plan or an offset plan. (8)

2. The disparity for all employees under the plan must not exceed the maximum excess allowance (in the case of an excess plan) or the maximum offset allowance (in the case of an offset plan). (9)

The "maximum excess allowance" is the lesser of (i) .75% (subject to reduction as described below) or (ii) the base benefit percentage for the plan year.10 The maximum excess allowance cannot exceed the base benefit percentage. (11)

The "maximum offset allowance" is the lesser of (i) .75% (reduced as described below) or (ii) one-half of the gross benefit percentage, multiplied by a fraction (not to exceed one), of which the numerator is the employee's average annual compensation, and the denominator is the employee's final average compensation up to the offset level. (12) The maximum offset allowance may not exceed 50% of the benefit that would have otherwise accrued. (13) (For plans meeting the maximum offset allowance limitation, the "PIA Offset" safe harbor described below may be available.)

3. The plan must satisfy the overall permitted disparity limits described below. (14)

4. The disparity for all employees under the plan must be uniform. To be uniform, an excess plan must use the same base benefit percentage and the same excess benefit percentage for all employees with the same number of years of service. An offset plan is uniform only if it uses the same gross benefit percentage and the same offset percentage for all employees with the same number of years of service. The disparity provided under a plan that determines each employee's accrued benefit under the fractional accrual method in IRC Section 411(b)(1)(C) is subject to special uniformity requirements. (1)

5. The integration level (under an excess plan) or offset level (under an offset plan) for each participant must be (i) the participant's "covered compensation" (see below), (ii) a uniform percentage (above 100%) of covered compensation, (iii) a uniform dollar amount or (iv) one of two intermediate amounts as specified in the regulations. (2)

The regulations under IRC Sections 401(a)(4) and 401(1) provide a "PIA offset" safe harbor for those defined benefit plans that limit the offset to the maximum offset allowance described above. Under the safe harbor, a defined benefit plan that satisfies any of the existing safe harbors provided in the regulations under IRC Section 401(a)(4) will not fail to be a safe harbor plan merely because it offsets benefits by a percentage of PIA. (3)

Covered compensation means the average of the taxable wage bases for the 35 calendar years ending with the last day of the calendar year an individual attains Social Security retirement age. (4) The IRS publishes tables annually for determining employees' covered compensation. (5)

Average annual compensation is the participant's highest average annual compensation for (i) any period of at least three consecutive years, or (ii) if shorter, the participant's full period of service. (6) Final annual compensation is the participant's average annual compensation for the 3-consecutive year period ending with the current year, or, if shorter, the participant's full period of service, but not exceeding the contribution and benefit base in effect for Social Security purposes for the year. (7)

Final regulations require certain reductions in the .75% factor if the integration or offset level exceeds covered compensation or if benefits begin at an age other than Social Security retirement age. These reductions may be determined on an individual basis by comparing each employee's final average to the employee's covered compensation. (8) For more specifics on integrating defined benefit plans. (9)

Overall Permitted Disparity

The Code specifies that in the case of an employee covered by two or more plans of an employer, regulations are to provide rules preventing the multiple use of the disparity otherwise permitted under IRC Section 401(1). Consequently, final regulations provide both an annual overall limit and a cumulative overall limit. (10)

The annual overall permitted disparity limit requires the determination of a fraction based on the disparity provided to an employee for the plan year under each plan. The annual overall limit is met if the sum of those fractions does not exceed one. (11)

The cumulative permitted disparity limit is generally satisfied if the total of an employee's annual disparity fractions under all plans for all years of service does not exceed 35. (1)

334. What is "compensation" for purposes of nondiscrimination in a qualified plan?

For purposes of the nondiscrimination rules and any other provision of the Code that specifically refers to IRC Section 414(s), "compensation" is defined in terms of IRC Section 415(c)(3) compensation, but compensation in excess of $245,000 (in 2010) is not taken into account (see Q 356F). (2) The limit is indexed for inflation in increments of $5,000. (3) See Appendix E for the indexed amounts for prior years.

Generally, IRC Section 415(c)(3) compensation is the compensation of the participant from the employer for the year. IRC Section 415(c)(3) compensation includes (but is not limited to) wages, salaries, fees for professional services and other amounts received for personal services actually rendered in the course of employment with the employer to the extent that the amounts are includable in income. (See Treasury Regulation [section] 1.415-2(d) for what items of compensation are included in and excluded from IRC Section 415(c)(3) compensation.) IRC Section 415(c)(3) (and hence, IRC Section 414(s)) will automatically be satisfied by the use of wages as defined for income tax withholding purposes, or wages reportable on Form W-2 (which may include certain items that are not "wages" for withholding purposes). (4)

Compensation includes elective deferrals, as well as any amounts contributed or deferred by the employer at the election of the employee that are excluded from income under a cafeteria plan, a qualified transportation fringe benefit plan, or an IRC Section 457 plan. (5) (However, IRC Section 414(s) permits an employer to either exclude or include such deferrals, as described below.)

Employers may demonstrate that a definition of compensation is nondiscriminatory using "snapshot" testing on a single day during the plan year, provided that day is representative of the employer's work force and the plan's coverage throughout the plan year. (6)

A definition of compensation other than IRC Section 415(c)(3) compensation can still satisfy IRC Section 414(s) if it meets the safe harbor definition or meets one of the alternative definitions plus a nondiscrimination test. (7) The safe harbor definition is IRC Section 415(c)(3) compensation, reduced by (1) reimbursements or other expense allowances, (2) fringe benefits (cash and noncash), (3) moving expenses, (4) deferred compensation, and (5) welfare benefits. (8) An alternative definition that defines compensation based on the rate of pay of each employee satisfies IRC Section 414(s) if the definition is nondiscriminatory and meets certain other requirements specified in the regulations. (9)

Generally, an employer may elect not to treat any of the following items as compensation: (1) elective contributions to a cafeteria plan, a qualified transportation fringe benefit plan, an IRC Section 401(k) arrangement, a cash or deferred SEP, or a tax sheltered annuity; (2) compensation deferred under a Section 457 plan; and (3) employee contributions to a government employer pick-up plan. (10)

Any other reasonable alternative definition of compensation can satisfy IRC Section 414(s) if it does not, by design, favor highly compensated employees and it meets a nondiscriminatory requirement. An alternative definition of compensation meets the nondiscriminatory requirement if the average percentage of total compensation included under the alternative definition for the employer's highly compensated employees as a group does not exceed by more than a de minimis amount the average percentage of total compensation included under the alternative definition for the employer's other employees as a group. (1) Self-employed individuals are subject to special rules for purposes of using an alternative definition. (2)

Compensation may have a slightly different definition for other purposes of the Code.

Section 415 Limits

335. What are the Section 415 limits for qualified plans?

IRC Section 415 sets maximum levels for contributions or benefits that a qualified plan may provide. The plan's provisions must preclude the possibility that benefits or contributions will exceed the limitations set forth in IRC Section 415 for any limitation year. (3)

For limitation years beginning in 2010, the highest annual benefit payable under a defined benefit plan (or under all such plans aggregated, if the employer has more than one) must not exceed the lesser of (a) 100% of the participant's average compensation in his high three years of service, or (b) $195,000 (in 2010, as indexed). (4) See Q 374 for details on the application of the Section 415 limits to defined benefit plans.

The "annual additions" to a participant's account under a defined contribution plan (or all such accounts aggregated, if the employer has more than one defined contribution plan) must not exceed the lesser of: (a) 100% of the participant's compensation, or (b) $49,000 (as indexed for 2010). (5) See Q 379 for details on the application of the Section 415 limits to defined contribution plans.

Unless the plan provides otherwise, a limitation year is the calendar year. (6) Contributions in excess of the Section 415 limits disqualify a plan for the year made and all subsequent years until such excess is corrected. (7) The regulations referenced throughout this question are to be effective for limitation years beginning on or after July 1, 2007. (8)

For purposes of the Section 415 limits, a benefit provided to an alternate payee of a participant pursuant to a qualified domestic relations order (QDRO, see Q 352) is treated as if it were provided to the participant. (9)

A controlled group of corporations or a group of trades or businesses under common control (each defined using a 50% rather than 80% test, see Q 362), or all members of an affiliated service group (see Q 363) are considered one employer for purposes of applying the limitations on contributions or benefits. (10)

A plan may incorporate the Section 415 limits by reference and will not fail to meet the definitely determinable benefit requirement (for defined benefit plans) or the definite predetermined allocation formula requirement (for defined contribution plans) merely because it incorporates the limits of IRC Section 415 by reference. (1)

Vesting

336. What are the vesting standards that a qualified plan must meet?

A plan must meet the following minimum standards concerning nonforfeitability of benefits (i.e., vesting). (2) (For the standards applicable to top heavy vesting, see Q 355.)

An employee's right to his normal retirement benefit must be nonforfeitable upon the attainment of normal retirement age. (3) "Normal retirement age" is defined in the Code as the earlier of (a) normal retirement age under the plan or (b) the later of age 65 or the fifth anniversary of the date participation commenced. (4) An employee's rights in his accrued benefit derived from his own contributions must be nonforfeitable. (5)

Defined benefit plans. A defined benefit plan (see Q 372) will satisfy the requirements of IRC Section 411(a)(1) if it provides for either of the following vesting schedules:

Five year cliff vesting: An employee who has at least five years of service must have a nonforfeitable right to 100% of his accrued benefit derived from employer contributions. (6)

Three to seven year vesting. An employee who has completed at least three years of service must have a nonforfeitable right to at least the following percentages of his accrued benefit derived from employer contributions: 20% after three years of service, 40% after four years of service, 60% after five years of service, 80% after six years of service, and 100% after seven years of service. (7)

Defined contribution plans. A defined contribution plan (see Q 377) will satisfy the requirements of IRC Section 411(a)(1) if it provides either of the following vesting schedules:

Three year cliff vesting: An employee who has at least three years of service must have a nonforfeitable right to 100% of his accrued benefit derived from employer contributions. (8)

Two to six year vesting. An employee who has completed at least two years of service must have a nonforfeitable right to at least the following percentages of his accrued benefit derived from employer contributions: 20% after two years of service, 40% after three years of service, 60% after four years of service, 80% after five years of service, and 100% after six years of service. (9)

These defined contribution schedules are effective for plan years beginning after December 31, 2006. In plan years beginning prior to 2007, only employer matching contributions were subject to these schedules; nonelective contributions were subject to the same schedules as defined benefit plans. (1)

Earlier regulations state that although it is often permissible for a plan to satisfy one of these requirements with regard to one group of employees and the other requirement with regard to another group, a plan must satisfy one of the requirements with regard to all of a particular employee's years of service. (2) Where there is a pattern of abuse (such as dismissing employees to prevent vesting), a more rapid rate of vesting may be required. (3) The determination of whether there is a pattern of abuse depends solely on the facts and circumstances in each case. (4)

Mandatory distributions. If the present value of an employee's vested accrued benefit exceeds $5,000, the benefit may not be immediately distributed without the consent of the participant. (5) If the present value of a participant's vested accrued benefit exceeds $1,000, absent an election by the participant, distributions must be transferred directly to an IRA. (6) For additional details see Q 457. The present value for this purpose is determined using the interest rate required by IRC Section 417(e)(3). (7) For purposes of the $5,000 limit, the vested accrued benefit may be determined without regard to rollover contributions and earnings allocable to them. (8) The allocation of plan administrative expenses to former (but not current) employees on a pro rata or other reasonable basis does not violate this requirement. (9)

The consent must be made within certain time limits, generally not less than 30 days, nor more than 180 days (in plan years beginning after December 31, 2006--90 days in earlier years), before the distribution commences, and may be made only after the participant receives notice of his distribution options, and an explanation of their relative values, as specified in regulations. (10) Generally, the use of certain electronic media for meeting the consent requirement is permitted if certain requirements are met. (11)

A participant's consent to a distribution is invalid if, under the plan, a significant detriment is imposed on any participant who does not consent to the distribution. (12) The IRS ruled that where a plan provided a broad range of investment alternatives to employee participants, but not to participants who terminated employment prior to normal retirement age, a significant detriment was imposed. Consequently, the consents obtained from participants were invalid and the plan failed to satisfy IRC Section 411(a)(11). (13)

Rate of benefit accruals or allocations. If an employee's benefit accruals (or allocations, in the case of a defined contribution plan) cease, or if the rate of an employee's benefit accrual (or rate of allocation) is reduced because of the attainment of any age, the plan will not satisfy the vesting requirements of the Internal Revenue Code. (14)

Changes in vesting schedule. If a plan's vesting schedule is modified by a plan amendment, each participant with at least three years of service must be permitted to elect to have his nonforfeitable percentage computed under the plan without regard to the amendment. (1)

Permitted forfeitures. The vesting rules do not require a plan to provide a preretirement death benefit, aside from the employee's accrued benefit derived from his own contributions. The Code provides, "A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that it is not payable if the participant dies..." except as required by the survivor annuity provisions. (2) See Q 339. A reversion to the employer of contributions made under a mistake of fact or a mistake as to deductibility is not a forfeiture even if it results in adjustment of an entirely or partially nonforfeitable account, provided the return is limited to an amount that does not reduce a participant's balance below what it would have been had the mistaken amount not been contributed. (3)

A plan may provide that payment of benefits to a retired employee is suspended for any period during which he resumes active employment with the employer who maintains the plan (or, in the case of a multiemployer plan, in the same industry, the same trade or craft, and the same geographic area covered by the plan as when his benefits commenced) without violating the nonforfeitability rules. (4) But the provision must be carefully drafted and administered to comply with applicable regulations and rulings. (5)

Full vesting required on plan termination or discontinuance of contributions. The plan must provide that upon its termination or partial termination (or, in the case of a profit sharing plan, also upon complete discontinuance of contributions), benefits accrued to the date of termination (or date of discontinuance of contributions) become nonforfeitable to the extent funded at such date. (6) Unless other facts suggest a partial termination, the mere merger or conversion of a money purchase pension plan into a profit sharing plan does not result in a partial termination for this purpose, provided that (a) all employees who are covered by the money purchase plan remain covered under the continuing profit sharing plan, (b) the money purchase plan assets and liabilities retain their characterization under the profit sharing plan, and (c) the employees vest in the profit sharing plan under the same vesting schedule that existed under the money purchase plan. (7)

Complete discontinuance of contributions may occur if amounts contributed by the employer are not substantial enough to reflect an intent to continue to maintain the plan. On the other hand, temporary suspension may not ripen into discontinuance. Failure for five years by an employer to make contributions solely because there are no current or accumulated profits does not constitute discontinuance where it is reasonable to expect profits to exist in future years. (8) Whether discontinuance has occurred depends on all the facts and circumstances. Thus, a provision that discontinuance will occur only when the ratio of aggregate contributions to compensation falls below a predetermined figure does not meet this qualification requirement. (9)

Reduction of benefits by offset. The vesting requirements are not violated by a provision requiring pension payments to be reduced, or offset, by amounts received by the pensioner under a state workers' compensation law. Furthermore, state laws prohibiting offset of retirement benefits by workers' compensation benefits are preempted by ERISA. (1) Vesting requirements were not violated where, under a severance pay plan, an employee's severance pay was reduced by the actuarial value, at discharge, of the employee's vested interest in a qualified pension plan. The severance pay plan was not a pension plan under ERISA subject to vesting standards. (2) A pension plan whose benefits may be offset by benefits under a profit sharing plan will be considered to satisfy benefit accrual requirements if (1) the accrued benefit determined without regard to the offset satisfies the vesting requirements and (2) the offset is equal to the vested portion of the account balance in the profit sharing plan (or a specified portion of the vested account balance). (3)

Definitions

"Normal retirement benefit" means the employee's accrued benefit without regard to whether it is vested; thus, a plan cannot qualify if it provides no retirement benefits for employees with less than five years of vesting service before normal retirement age. (4) A plan that provides that an employee's right to his normal retirement benefit becomes nonforfeitable on his normal retirement date will fail to meet this requirement if his normal retirement date, as defined in the plan, may occur after his "normal retirement age" as defined in IRC Section 411 (e.g., where normal retirement date is defined in the plan to be the first day of the calendar month following the employee's 65th birthday). (5)

The term "accrued benefit" means, in the case of a defined benefit plan, the employee's accrued benefit determined under the plan (see Q 373) expressed in the form of an annual benefit commencing at normal retirement age, or, in the case of any other kind of plan, the balance of the employee's account. (6) Generally, the accrued benefit of a participant may not be decreased by an amendment to the plan (see Q 337).

The term "year of service" generally means a 12-month period designated by the plan during which the employee has worked at least 1,000 hours.7 All years of an employee's service with the employer are taken into account for purposes of computing the nonforfeitable percentages specified above, except those years specifically excluded in IRC Section 411(a). (8)

A right to an accrued benefit is considered to be "nonforfeitable" at a particular time if, at that time and thereafter, it is an unconditional right. (9) Some courts have made a distinction between "vesting" and "nonforfeitability." A participant is vested when he has an immediate, fixed right of present or future enjoyment of his accrued benefit. But a plan may provide that a vested benefit will be forfeited in whole or in part if, for example, the participant terminates his employment and goes to work for a competitor of the employer or commits a crime against the employer. (10) Thus for example, a participant could be offered immediate 100% vesting of his benefit under a plan, but the benefit could be forfeitable (to the extent the benefit would not be vested under the closest Code and ERISA schedules) if he commits certain forbidden acts.

Several circuit courts have held that such forfeiture provisions are enforceable only to the extent that the accrued benefit forfeited by commission of the forbidden act is in excess of the nonforfeitable accrued benefit derived from employer contributions to which the participant was entitled under the nearest equivalent ERISA vesting schedule at the time the forfeiture occurred.1The temporary regulations generally follow this reasoning. (2)

337. What is the anti-cutback rule and what benefits does it protect?

The accrued benefit of a participant generally may not be decreased (directly or indirectly) by an amendment to the plan. (3) This provision is referred to as the anti-cutback rule. (An exception is provided in certain cases of substantial business hardship; see below.)

Except as otherwise provided below, a plan amendment that has the effect of (1) eliminating or reducing an early retirement benefit or a retirement-type subsidy or (2) eliminating certain optional forms of benefit attributable to service before the amendment is treated as impermissibly reducing accrued benefits. (4)

The anti-cutback rule does not prohibit any plan amendment that reduces or eliminates benefits or subsidies that create significant burdens or complexities for the plan and plan participants, unless the amendment adversely affects the rights of any participant in a more than de minimis manner. (5) But if a series of plan amendments made at different times have the effect, when taken together, of reducing or eliminating a protected benefit in a more than de minimis manner, the amendment will violate IRC Section 411(d)(6). (6)

Employee stock ownership plans (ESOPs, see Q 420) will not be treated as failing to meet the anti-cutback requirement merely on account of modifying distribution options in a nondiscriminatory manner. (7)

Transfers between plans. Generally, benefits that are protected under IRC Section 411(d)(6) may not be eliminated by reason of a transfer or any transaction amending or having the effect of amending a plan to transfer benefits. But a defined contribution "transferee" plan (e.g., in a merger, acquisition, consolidation, or similar transaction) will not be treated as failing the anti-cutback rule merely because the transferee plan does not provide some or all of the forms of distribution previously available under a "transferor" plan, if certain requirements are met. (8)

Elimination of a form of distribution. Generally, except to the extent provided in regulations, a defined contribution plan will not be treated as failing the anti-cutback rule merely because of the elimination of a form of distribution previously available under the plan, provided that, with respect to any participant, (i) a single sum payment is available to the participant at the same time or times as the form of distribution being eliminated and (ii) the single sum payment is based on the same or greater portion of the participant's account as the form of distribution being eliminated. (9)

Redundancy rule. A plan generally may be amended to eliminate an optional form of benefit with respect to benefits accrued before the amendment date if the optional form of benefit is redundant with a retained optional form of benefit. (1) For this purpose, the regulations identify six basic "families" of optional forms of benefit: (1) the 50% or more joint and contingent family, (2) the below 50% joint and contingent family, (3) the 10 years or less term certain and life annuity family, (4) the greater than 10 years term certain and life annuity family, (5) the 10 years or less level installment family, and (6) the greater than 10 years level installment family. (2) But the redundancy rule does not apply to certain "core options" (see alternative rule, below) unless the retained optional form of benefit and the eliminated option are identical except for differences described in the proposed regulations. (3)

Alternative rule. In the alternative, an employer is permitted to eliminate a protected benefit if (a) the amendment does not apply to participants with annuity starting dates less than four years after the date the amendment is adopted and (b) certain "core options" are retained. (4) The "core options" generally mean (i) a straight life annuity, (ii) a 75% joint and contingent annuity, (iii) a 10-year certain and life annuity, and (iv) the most valuable option for a participant with a short life expectancy. (5)

Benefits Protected

An employee's accrued benefit is the balance of the employee's account held under the plan; but the IRS has stated that it also includes amounts to which the participant is entitled under the terms of the plan, even where the bookkeeping process of crediting those amounts to the participant's account has not yet occurred.6Thus, a retroactive amendment to a defined contribution plan's allocation formula after the contribution for the year had been made but before the allocation had taken place was determined to have violated IRC Section 411(d)(6), because it reduced the amounts allocated to some of the participants. (7)

The elimination of a cost-of-living adjustment (COLA) provision through termination of a plan violated the ERISA prohibition against the reduction of accrued benefits. (8) But see "Benefits Not Protected" below. It has also been held that a company's limitation of a lump sum distribution option, resulting in a decrease in former employees' accrued benefits violated the ERISA provision and IRC Section 411(d)(6). (9)

The Supreme Court has determined that the rule prohibiting cutbacks of early retirement benefits or retirement-type subsidies was violated when a company adopted a plan amendment expanding the range of post-retirement employment that would disqualify retired construction workers from receiving pension benefits. (10) The IRS followed with guidance limiting the retroactive application of this provision. (11) Final regulations take the position that a plan amendment may not impose new restrictions on a participant's rights to benefits that are protected under IRC Section 411(d)(6), whether or not the amendment would otherwise be permitted under the Code. (12)

A change in actuarial factors may result in a violation of the anti-cutback rule. A cash balance plan (see Q 375) was determined to have violated the rule where its use of a lower interest rate than was guaranteed by the plan resulted in a taxpayer receiving less than the actuarial equivalent of her normal retirement benefit. (1) The IRS has provided guidance as to when a change in actuarial factors will indirectly affect accrued benefits, as well as acceptable methods for preventing a violation of the vesting rules as a result of such a change. (2)

Benefits Not Protected

In spite of the fact that a COLA provision may constitute an essential element of an accrued benefit, (3) a COLA provision was not an accrued benefit with respect to retirees who retired before the provision was adopted, even though it was made available to them. (4)

Regulations permit profit sharing or stock bonus plans (as well as cash or deferred arrangements) to be amended to eliminate hardship withdrawal provisions, without violating IRC Section 411(d)(6). (5)

Generally, plan amendments (adopted within the remedial amendment period) necessary to bring the plan into compliance with the Code, or prevent unintended benefit increases as a result of a Code amendment, are afforded relief from IRC Section 411(d)(6). (6) Thus, for example, the elimination of the right to receive employer securities from an S corporation ESOP does not violate IRC Section 411(d)(6). (7) Nor does the elimination of the right to receive a distribution prior to retirement after age 70/ (see Q 343), if certain conditions are met. (8)

The following benefits are not protected under IRC Section 411(d)(6) and may be reduced or otherwise amended: (1) ancillary life insurance protection, (2) accident or health insurance benefits, (3) availability of loans, (4) the right to make after-tax contributions or elective deferrals, and (5) the right to direct investments. (9) Generally ancillary benefits, other rights or features, and any other benefits not described in IRC Section 411(d)(6) are not protected under IRC Section 411(d)(6). (10)

In spite of the protection provided to early retirement benefits, the IRS determined that where an employer offered an early retirement window benefit repeatedly for substantially consecutive, limited periods of time, its failure to offer the benefit permanently did not violate IRC Section 411(d)(6). (11)

Special Rules

Plans subject to the funding standards of ERISA Section 302 (generally, defined benefit plans, money purchase pensions and target benefit plans), must meet a notice requirement if the plan is amended in a manner that significantly reduces the participants' rate of future benefit accruals. (12)

Under limited circumstances, a retroactive plan amendment reducing benefits may be available in the case of a substantial business hardship where it is determined that a waiver of the minimum funding standard (see Q 392) is unavailable or inadequate. (13) Among the factors the IRS will consider in determining whether a substantial business hardship exists are whether (1) the employer is operating at an economic loss, (2) there is substantial unemployment or underemployment in the trade or business and the industry concerned, (3) the sales and profits of the industry are depressed or declining, and (4) it is reasonable to expect that the plan will be continued only if the waiver is granted. (1) The Service permitted such an amendment to a plan whose sponsor was insolvent and expected no additional revenues (but the plan's only participants and the sponsor's only employees were the five owners of the business). (2)

Automatic Survivor Benefits

338. Which types of plans are subject to the automatic survivor benefit requirements?

The automatic survivor benefit requirements (i.e., the requirement that a plan provide the qualified joint and survivor annuity (QJSA) and qualified preretirement survivor annuity (QPSA) forms of benefit, see Q 339) apply to all defined benefit plans and to those defined contribution plans which are subject to the minimum funding standards (e.g., target benefit and money purchase pensions). (3)

The automatic survivor benefit requirements may also apply to any participant under any other defined contribution plans unless (a) the plan provides that in the event of the participant's death, his nonforfeitable accrued benefit will be paid in full to his surviving spouse (or to another designated beneficiary if the spouse consents or if there is no surviving spouse); (b) the participant does not elect payment of benefits in the form of a life annuity; and, (c) with respect to such participant, the plan is not a direct or an indirect transferee of a plan to which the automatic survivor annuity requirements apply. (4)

If the three requirements in the preceding paragraph are met, the automatic survivor benefit requirements will not apply to the portion of benefits accrued under a tax credit ESOP or leveraged ESOP if the participant has the right (1) to demand distribution in the form of employer securities or (2) to require repurchase by the employer of nonpublicly traded securities. (5)

339. What forms of survivor benefits must be provided under a qualified plan?

Plans that are subject to the automatic survivor benefit requirements (see Q 338) must provide that, unless waived by the participant with the consent of his spouse (see Q 340), retirement benefits will be paid in the form of a "qualified joint and survivor annuity." (6) An unmarried participant must be provided with a life annuity, unless he or she elects another form of benefit. (7) Furthermore, such plans must provide that if a vested participant dies prior to the annuity starting date, leaving a surviving spouse, benefits will be paid in the form of a "qualified preretirement survivor annuity"; but this also may be waived by the participant with the consent of his or her spouse (see Q 340). These requirements apply to retirement benefits derived from employer and employee contributions and those attributable to rollover contributions. (8)

If the present value of the participant's benefit does not exceed $5,000, the plan may provide for a lump sum cash-out of the qualified joint and survivor annuity or a qualified preretirement survivor annuity benefit. But after the participant's annuity starting date (see below) such a cash-out may be made only if the participant and his spouse (or surviving spouse) consent in writing. (9)

The "annuity starting date" is the first day of the first period for which an amount is payable as an annuity (regardless of when or whether payment is actually made) or, in the case of benefits not payable in the form of an annuity, the date on which all events have occurred which entitle the participant to the benefit. (1) This requirement applies only to those benefits in which a participant was vested immediately prior to his death under a defined benefit plan and to all nonforfeitable benefits that are payable under a defined contribution plan. (2)

Qualified joint and survivor annuity (QJSA) means an annuity (1) for the life of the participant, with a survivor annuity for the life of his spouse that is not less than one-half (nor greater than 100%) of the amount of the annuity payable during the joint lives of the participant and his spouse, and (2) that is the actuarial equivalent of a single annuity for the life of the participant. (Any annuity having the foregoing effect will be treated as a QJSA.) (3) With respect to married participants, the qualified joint and survivor annuity must be at least as valuable as any other optional form of benefit payable under the plan at the same time. If a plan has two joint and survivor annuities that satisfy the QJSA requirements and one has a greater actuarial value than the other, the more valuable one is the QJSA. If a plan offers two actuarially equivalent joint and survivor annuities that meet the QJSA requirements, it may designate which joint and survivor annuity is the QJSA, but allow a participant to elect out of the designated QJSA in favor of the equivalent QJSA without spousal consent. (4)

A plan must permit a participant to receive a distribution under a QJSA when the participant attains the earliest retirement age under the plan. The earliest retirement age is the earlier of (1) the earliest age at which a participant could receive a distribution under the plan or (2) the early retirement age determined under the plan (or, if no early retirement age, the normal retirement age under the plan). (5)

Qualified preretirement survivor annuity (QPSA) means a survivor annuity for the life of the surviving spouse of the participant under which payments are to begin not later than the month in which the participant would have reached the earliest retirement age provided under the plan, and that meets the following requirements with respect to the amount of the annuity:

(1) In the case of a defined contribution plan, the actuarial equivalent of the survivor annuity must not be less than one-half of the participant's vested account balance as of the date of his death. (6)

(2) In the case of all other plans, (a) if the participant died after the date he attained the earliest retirement age provided under the plan, the payments to the surviving spouse must not be less than the amounts that would have been payable under the survivor portion of a qualified joint and survivor annuity had the participant retired with an immediate qualified joint and survivor annuity on the day before he died; or (b) if the participant died on or before the date he would have reached the earliest retirement age, the payments to the surviving spouse must not be less than the amounts that would have been paid under the survivor portion of a QJSA had the participant separated from service on the earlier of the actual time of separation or death, survived to the earliest retirement age, retired with an immediate qualified joint and survivor annuity at the earliest retirement age, and died on the day after he reached the earliest retirement age. (7) But in any case payments to the surviving spouse must not violate the incidental benefit rule (see Q 427). (8)

A defined benefit plan must permit the surviving spouse to receive distributions under the QPSA no later than the month in which the participant would have attained the earliest retirement age. In the case of a defined contribution plan, the spouse must be permitted to elect to begin receiving payments under the QPSA within a reasonable time after the participant's death. (1)

Qualified optional survivor annuity. In plan years beginning after December 31, 2007, a plan will satisfy the QJSA requirements only if a participant who has waived the QJSA or QPSA form of benefit (or both) may elect a qualified optional survivor annuity. (2) The term "qualified optional survivor annuity" means an annuity for the life of the participant with a survivor annuity for the life of the spouse which is equal to an "applicable percentage" of the amount of the annuity that is payable during the joint lives of the participant and spouse. For this purpose, if the survivor annuity percentage is less than 75%, the qualified optional survivor annuity percentage must be at least 75%. If the survivor annuity percentage was equal to or greater than 75%, the qualified optional survivor annuity percentage must be at least 50%. (3)

A plan generally is not required to provide either the QJSA or the QPSA in any case where the participant and his spouse were not married throughout the one-year period ending on the earlier of the participant's annuity starting date (see above) or the date of the participant's death. But if a participant marries within one year before the annuity starting date and he and his spouse were married for at least a one-year period ending on or before the date of the participant's death, such participant and such spouse are treated as though they had been married throughout the one-year period ending on the participant's annuity starting date. (4) Special rules may apply where there is a qualified domestic relations order (QDRO) in effect that applies to plan benefits (see Q 352).

Written Notice

A plan generally must, within certain specified periods, provide each participant (vested and nonvested, married or unmarried) with a written explanation of the automatic survivor annuity forms of benefit, certain optional forms of benefit, and their relative values. The notice must explain the participant's (and his or her spouse's) rights with respect to waiving such benefits. (5) Notices of automatic survivor benefits generally may be provided in electronic form, provided certain requirements are met. (6)

The explanation may be provided after the annuity starting date; but the applicable election period (i.e., for waiving the benefit, see Q 340) may not end before the 30th day after the explanation is provided. (7) (Under certain circumstances, a "retroactive annuity starting date" may be permitted. (8) See Q 340.) The plan may allow the participant (with any applicable spousal consent) to waive the 30-day requirement if the distribution begins more than seven days after the explanation is provided. (9)

The explanation must include information on the financial effect and relative value comparisons of any optional forms of benefit compared to the value of the QJSA. This may be offered in the form of generally applicable information or as information that is specific to the participant to whom it is provided. Details and procedures for making the required disclosures, as well as a sample disclosure, are set forth in final regulations. These requirements are generally effective for QJSA explanations with annuity starting dates after February 1, 2006. (1)

A plan that fully subsidizes a qualified survivor annuity is not required to provide an explanation unless it offers participants an election to waive the benefit or designate a beneficiary. (2)

Special Rules

For plan years beginning before January 1, 2008, the present value of the accrued benefit generally must be determined using the annual interest rate on 30-year Treasury securities for the month before the date of distribution; but temporary regulations permit the employer to base the determination on a monthly, quarterly, or annual interest rate. Also, the rate may be determined using any month during a "stability period" of up to five months, provided the plan specifies which month will be used. In any event, the interest rate must be determined in a consistent manner that is applied uniformly to all plan participants. (3)

In plan years beginning after December 31, 2007, the present value of the accrued benefit generally must be determined using a mortality table specified in regulations and an interest rate derived from a three-segment yield curve, phased in over five years. (4)

Corrective distributions of excess contributions and excess aggregate contributions (see Q 413) as well as of excess deferrals (see Q 399) are not subject to the spousal consent rules. (5)

Generally, plans that offer plan loans (see Q 433 to Q 435) and are subject to the automatic survivor benefit requirements must provide that no portion of the accrued benefit of the participant may be used as security for any loan unless, at the time the security agreement is entered into, the participant's spouse consents to the use of the accrued benefit as security. (6) If spousal consent is not obtained or is not required at the time benefits are used as security, it is not required at the time of any setoff of the loan against the accrued benefit, even if the participant is married to a different spouse at the time of the setoff. (7)

The automatic survivor benefit rules generally do not apply to a beneficiary who murders his participant spouse. (8) But an employee's widow convicted of his murder was held entitled to receive the preretirement annuity where applicable state law made her a constructive trustee of the annuity. (9)

340. Under what circumstances may survivor benefits required under a qualified plan be waived?

A qualified plan generally must provide that participants may elect (or revoke an election) to waive the qualified joint and survivor annuity (QJSA) and/or the qualified preretirement survivor annuity (QPSA) forms of benefit (see Q 339) at any time during the applicable election period. (10) If such a waiver is made in plan years beginning after December 31 2007, the participant may elect the qualified optional survivor annuity at any time during the applicable election period. (1) But the plan must also provide that such an election will not be effective unless (1) the spouse of the participant (if any) consents in writing to the election; (2) the election designates a beneficiary, or a form of benefits, which may not be changed without spousal consent (unless the consent expressly permits future designations by the participant without further spousal consent); and (3) the consent acknowledges the effect of the election and is witnessed by a plan representative or notary public. (2)

An election made without the consent of the spouse is effective only if it is established to the satisfaction of a plan representative that there is no spouse, that the spouse cannot be located, or that certain other specified circumstances prevent securing such consent. (3) Any consent by the spouse of a participant, or proof that consent cannot be obtained from such spouse, is effective only with respect to that spouse (except in the case of plan benefits securing a loan--see Q 339). (4)

A spousal waiver that had not been properly witnessed or notarized was struck down despite the wife's acknowledgement that she had signed the form, because the waiver did not meet the requirements clearly set forth in the Code and ERISA. (5) But in an earlier district court ruling, the lack of a written, notarized spousal consent did not render the designation of a non-spouse beneficiary completely ineffective; the designation remained effective to the extent the benefits exceeded what was required to be paid to the spouse. (6)

A prenuptial agreement (or similar contract) entered into prior to marriage is not, by itself, effective to waive a widow's surviving spouse benefits. (7) (Both cases were decided under parallel provisions found in ERISA Section 205(c) and IRC Section 417(a).) (8) For a valid waiver to occur, ERISA requires a notarized waiver containing specific language, by a spouse who actually has (by marriage) the statutory benefits being waived. In addition, the spouse executing the waiver must designate an alternative beneficiary. (9)

The Court of Appeals for the Eighth Circuit held that neither a prenuptial agreement with a participant's second wife, nor a separation agreement in which his first wife had "relinquished any right, title or interest in and to any ... pension plans" constituted a valid waiver; thus, the court divided the benefit equally between them upon his death. (10) But the Court of Appeals for the Fourth Circuit found that a valid waiver was executed where the separation agreement specified the plan in which the interest was waived, even though the ex-wife was still named as beneficiary. (11)

Planning Point: Because of the administrative difficulties involved, plan sponsors should consider whether the costs of imposing a one-year of marriage requirement outweigh any potential savings. Martin Silfen, J.D., Brown Brothers Harriman Trust Co., LLC.

Planning Point: An employer should consider writing the plan document to do what superseded state statutes may not do (i.e., state that a participant's designation of his spouse as beneficiary automatically becomes void upon his divorce unless he reaffirms that designation after his divorce). Martin Silfen, J.D., Brown Brothers Harriman Trust Co., LLC.

A plan is not required to permit a waiver of the QJSA or QPSA form of benefit if it fully subsidizes the cost of such benefit and does not permit a participant to waive the benefit or designate another beneficiary. (A plan fully subsidizes the cost of a benefit if the failure to waive the benefit would not result in a decrease of any plan benefits to the waiving participant and would not result in increased contributions from that participant.) (1)

Applicable Election Period

With respect to the QJSA form of benefit, the applicable election period is the 180-day period ending on the annuity starting date (the 90-day period, in the case of plan years beginning before 2007).2 Generally, the plan may not commence the distribution of any portion of a participant's accrued benefit to which these requirements apply unless the applicable consent requirements are satisfied. (3)

Generally, the plan must provide participants with written notice of the QJSA requirement no less than 30 days and no more than 180 days (90 days for plan years prior to 2007) before the annuity starting date. (4) But if the participant, after receiving the written explanation of the QJSA, affirmatively elects a form of distribution (with spousal consent), the plan will not fail to satisfy the requirements of IRC Section 417(a) merely because the annuity starting date is less than 30 days after the written explanation was provided to the participant, provided four requirements are met: (1) the plan administrator must provide information to the participant clearly indicating that the participant has a right to at least 30 days to consider whether to waive the QJSA and consent to another form of distribution; (2) the participant must be permitted to revoke an affirmative distribution election at least until the annuity starting date, or, if later, at any time prior to the expiration of the seven-day period that begins the day the explanation of the QJSA is provided to the participant; (3) the annuity starting date must be after the date the explanation of the QJSA is provided (except as provided in IRC Section 417(a)(7), see Q 339); and (4) distribution in accordance with the affirmative election must not begin before the expiration of the seven-day period that begins the day the explanation of the QJSA is provided to the participant. (5)

Prior to the issuance of the regulations under IRC Section 417, a district court sided with the IRS in finding that an election to waive the QJSA made prior to the 90-day period was invalid. (6)

With respect to the QPSA form of benefit, the applicable election period begins on the first day of the plan year in which the participant attains age 35 and ends on the date of his death; but where a participant has separated from service with the employer, the election period with respect to previously accrued benefits may begin no later than the date of separation. (7)

Generally, the applicable election period may not end before the 30th day after the plan provides the explanation required under IRC Section 417(a)(3). (8) Under that rule, a plan generally must, within certain specified periods, provide each participant (vested and nonvested, married or unmarried) with a written explanation of the automatic survivor annuity forms of benefit and of the participant's (and his spouse's) rights with respect to waiving the benefits (see Q 339).

(1.) For details, see IRC Sec. 45E.

(2.) For details, see Rev. Proc. 2008-50, 2008-35 IRB 464.

(1.) IRC Sec. 401(a)(31)(A).

(2.) See IRC Sec. 401(a)(31)(B).

(3.) IRC Sec. 3405(c); Treas. Reg. [section] 1.401(a)(31)-1, A-1(b)(1).

(4.) IRC Sec. 401(a)(31)(B); Labor Reg. [section] 2550.404a-2.

(5.) IRC Sec. 401(a)(31)(B).

(6.) IRC Sec. 402(f).

(7.) 2002-1 CB 289.

(8.) See IRC Sec. 408(q); Treas. Reg. [section] 1.408(q)-1(a).

(1.) Treas. Reg. [section] 1.401-1(a)(2); Rev. Rul. 71-90, 1971-1 CB 115; Rev. Rul. 71-91, 1971-1 CB 116; Let. Rul. 8752001.

(2.) Engineered Timber Sales, Inc. v. Comm., 74 TC 808 (1980), appeal dismissed (5th Cir. 1981); G&W Leach Co. v. Comm., TC Memo 1981-91.

(3.) IRC Sec. 401(g); Treas. Reg. [section] 1.401-8(d)(2).

(4.) IRC Sec. 401(f).

(5.) Lansing v. Comm.,TC Memo 1976-313.

(6.) Rev. Rul. 89-52, 1989-1 CB 110.

(7.) IRC Sec. 401(a)(24); Rev. Rul. 81-100, 1981-1 CB 326.

(8.) See Basch Engg Inc. v. Comm., TC Memo 1990-212; Fazi v. Comm., 102 TC 695 (1994).

(9.) Bollinger v. Comm., 77 TC 1353 (1981); Oaktoon Distributors, Inc. v. Comm., 73 TC 182 (1979).

(10.) Stark Truss Coo., Inc. v. Comm., TC Memo 1991-329. See also, Koollipara Rajsheker, M.D., Inc. v. Comm.,TC Memo 1992-628.

(11.) See also, Treas. Reg. [section] 1.413-1.

(12.) IRC Sec. 401(a).

(1.) Rev. Rul. 69-493, 1969-2 CB 88.

(2.) Treas. Reg. [section] 31.3121(d)-1(c)(2); Packard v. Comm., 63 TC 621 (1975).

(3.) See e.g., Lozon v. Comm., TC Memo 1997-250.

(4.) Treas. Reg. [section] 1.401-1(b)(3); Rev. Rul. 63-108, 1963-1 CB 87; Rev. Rul. 55-81, 1955-1 CB 392; Thomas Kiddie, M.D, Inc. v. Comm., 69 TC 1055 (1978).

(5.) See IRC Sec. 7701(a)(20).

(6.) Treas. Reg. [section] 1.401-10(b)(3).

(7.) Rev. Rul. 73-380, 1973-2 CB 124; Rev. Rul. 73-282, 1973-2 CB 123; Rev. Rul. 73-532, 1973-2 CB 128; Rev. Rul. 69-494, 1969-2 CB 88; Feroleto Steel Co. v. Comm., 69 TC 97 (1977); Bing Management Co, Inc. v. Comm.,TC Memo 1977-403.

(8.) Wingers Dept. Store, Inc. v. Comm., 82 TC 869 (1984).

(9.) TAM 9145006; see also TAM 9701001.

(10.) See TAM 9430002.

(11.) See Shedco, Inc v. Comm.,TC Memo 1998-295.

(1.) GCM 39870 (4-17-92).

(2.) Let. Rul. 200426027.

(3.) IRC Sec. 401(a)(2).

(4.) Rev. Rul. 91-4, 1991-1 CB 54; see also ERISA Sec. 403(c)(2)(B).

(5.) Rev. Rul. 91-4, above; see also ERISA Secs. 403(c)(2)(A), 403(c)(2)(C).

(6.) Rev. Proc. 90-49, 1990-2 CB 620.

(7.) Let. Ruls. 9021049, 8948056.

(8.) See Rev. Proc. 90-49, above, Sec. 4.

(9.) Treas. Reg. [section] 1.401-2(b); Rev. Rul. 70-421, 1970-2 CB 85; Rev. Rul. 71-152, 1971-1 CB 126; Rev. Rul. 73-55, 1973-1 CB 196; Rev. Rul. 71-149, 1971-1 CB 118.

(10.) See ERISA Sec. 4044(d)(1).

(11.) Rinard v. Eastern Coo., 978 F.2d 265 (6th Cir. 1992), cert. denied, 113 S.Ct. 1843 (1993).

(12.) See Holland v. Amalgamated Sugar Co., 787 F. Supp. 996 (D.C. Utah 1992).

(1.) IRC Sec. 401(h)(5).

(2.) IRC Secs. 401(a)(3), 410(a)(1). See Temp. Treas. Reg. [section] 1.410(a)-3T.

(3.) IRC Sec. 410(a)(2).

(4.) For illustrations, see Rev. Rul. 80-360, 1980-2 CB 142. IRC Sec. 410(a)(4); Treas. Reg. [section] 1.410(a)-4(b)(1).

(5.) Memorandum dated October 22, 2004, Carol D. Gold, Director Employee Plans.

(6.) Treas. Reg. [section] 1.410(a)-3(d).

(7.) Treas. Reg. [section] 1.410(a)-3(e)(1).

(8.) IRS Field Directive (November 22, 1994), CCH Pension Plan Guide [paragraph] 23,902F; see also TAM 9508003.

(1.) IRC Secs. 410(a)(3), 410(a)(5); Treas. Regs. [subsection] 1.410(a)-5, 1.410(a)-6. See Temp. Treas. Reg. [section] 1.410(a)-8T, Treas. Reg. [section] 1.410(a)-9.

(2.) IRC Secs. 410(a)(3)(B), 410(a)(3)(D); Treas. Reg. [section] 1.410(a)-5.

(3.) IRS Field Directive (November 22, 1994), CCH Pension Plan Guide [paragraph]23,902F.

(4.) See Rev. Rul. 72-5, 1972-1 CB 106.

(5.) See Let. Rul. 7742003.

(6.) IRC Sec. 401(a)(3).

(7.) IRC Sec. 410(c)(1)(A); See IRC Sec 401(a)(5)(G).

(8.) IRC Sec. 414(v)(3)(B).

(9.) IRC Sec. 410(b)(1).

(10.) Treas. Reg. [section] 1.410(b)-2(b)(2)(i).

(11.) Treas. Reg. [section] 1.410(b)-9.

(1.) Treas. Reg. [section] 1.410(b)-2(b)(3); see IRC Sec. 410(b)(2).

(2.) IRC Sec. 410(b)(2)(A)(i).

(3.) Treas. Reg. [section] 1.410(b)-4(b).

(4.) Treas. Reg. [section] 1.410(b)-4(c).

(5.) Treas. Reg. [section] 1.410(b)-4(c).

(6.) See Treas. Reg. [section] 1.410(b)-4(c)(4)(iv).

(7.) Treas. Regs. [subsection] 1.410(b)-4(c)(2), 1.410(b)-4(c)(4)(i).

(8.) Treas. Reg. [section] 1.410(b)-4(c)(4)(ii).

(1.) IRC Sec. 410(b)(2)(A)(ii); Treas. Reg. [section] 1.410(b)-5(a).

(2.) IRC Sec. 410(b)(2)(C)(i).

(3.) Treas. Reg. [section] 1.410(b)-5(d)(2).

(4.) See Treas. Reg. [section] 1.410(b)-5(d)(5).

(5.) IRC Sec. 410(b)(2)(B).

(6.) IRC Sec. 410(b)(2)(C).

(7.) IRC Sec. 410(b)(6)(F); Treas. Regs. [subsection] 1.410(b)-2(b)(5), 1.410(b)-2(b)(6).

(8.) IRC Sec. 410(b)(5).

(9.) IRC Sec. 414(r); Treas. Regs. [subsection] 1.414(r)-5, 1.414(r)-6.

(10.) Treas. Reg. [section] 1.410(b)-2(a).

(11.) Treas. Reg. [section] 1.410(b)-2(c)(2).

(1.) IRC Sec. 410(b)(3); Treas. Regs. [subsection] 1.410(b)-6(d), 1.410(b)-9.

(2.) See Rev. Rul. 80-351, 1980-2 CB 152. But see Olmo v. Comm.,TC Memo 1979-286.

(3.) IRC Sec. 410(b)(4).

(4.) IRC Sec. 410(b)(2)(D).

(5.) Treas. Reg. [section] 1.410(b)-6(f)(1).

(6.) Treas. Reg. [section] 1.410(b)-6(b)(1).

(7.) Treas. Reg. [section] 1.410(b)-3(a).

(8.) IRC Sec. 410(b)(6)(E). See General Explanation of TRA '86, p. 674.

(9.) Treas. Regs. [subsection] 1.410(b)-3(a)(2)(ii), 1.410(b)-3(a)(2)(iii).

(10.) See Treas. Reg. [section] 1.401(k)-1(b)(4)(v).

(1.) Treas. Reg. [section] 1.410(b)-7(c)(4).

(2.) Treas. Reg. [section] 1.410(b)-7(c)(4)(i)(D).

(3.) Treas. Reg. [section] 1.410(b)-7(c)(4)(ii)(C).

(4.) Treas. Regs. [subsection] 1.410(b)-7(d)(1), 1.410(b)-7(d)(5).

(5.) Treas. Reg. [section] 1.410(b)-7(d).

(6.) Treas. Regs. [subsection] 1.410(b)-7(c), 1.410(b)-7(d)(2).

(7.) IRC Sec. 401(k)(4)(C); Treas. Reg. [section] 1.410(b)-7(e).

(8.) See Treas. Reg. [section] 1.410(b)-5(f).

(9.) IRC Sec. 401(a)(6).

(10.) Rev. Proc. 93-42, 1993-2 CB 540.

(11.) Treas. Regs. [subsection] 1.401(a)(4)-11(g)(2), 1.401(a)(4)-11(g)(3)(iv).

(12.) Treas. Reg. [section] 1.401(a)(4)-11(g)(3).

(13.) See IRC Sec. 410(b)(6)(C).

(1.) For details, see Rev. Rul. 2004-11, 2004-7 IRB 480.

(2.) IRC Sec. 402(b)(2).

(3.) See IRC Secs. 410(c)(1)(B), 410(c)(2).

(4.) IRC Sec. 410(c)(1)(D).

(5.) Rev. Rul. 63-108, 1963-1 CB 87; Rev. Rul. 55-81, 1955-1 CB 392.

(6.) Rev. Rul. 72-4, 1972-1 CB 105 (Rev. Rul. 55-81 amplified).

(7.) See Kenney v. Comm.,TC Memo 1995-431.

(8.) Treas. Reg. [section] 1.401(a)(4)-1(b)(1).

(1.) IRC Secs. 401(a)(4), 410(b)(3). See, e.g., Let. Rul. 8419001.

(2.) See IRC Sec. 401(a)(5)(G).

(3.) See Notice 2003-6, 2003-1 CB 298; Notice 2001-46, 2001-2 CB 122.

(4.) Treas. Reg. [section] 1.401(a)(4)-1(a).

(5.) IRC Sec. 401(a)(5)(B).

(6.) Treas. Reg. [section] 1.401(a)(4)-1(a).

(7.) IRC Sec. 414(v)(3)(B).

(8.) Treas. Reg. [section] 1.401(a)(4)-2(b)(2).

(1.) See Treas. Reg. [section] 1.401(a)(4)-2(b)(3).

(2.) Treas. Reg. [section] 1.401(a)(4)-2(b)(4)(v).

(3.) Treas. Reg. [section] 1.401(a)(4)-2(c)(1).

(4.) IRC Sec. 401(a)(5)(F).

(5.) Treas. Reg. [section] 1.401(a)(4)-3(b).

(6.) Treas. Reg. [section] 1.401(a)(4)-3(c)(1).

(7.) Treas. Reg. [section] 1.401(a)(4)-3(c)(3).

(1.) IRC Sec. 401(a)(5)(F).

(2.) Treas. Reg. [section] 1.401(a)(4)-8(b)(3).

(3.) IRC Secs. 401(k), 401(m); Treas. Reg. [section] 1.401(a)(4)-1(b)(2)(ii)(B).

(4.) Memorandum dated October 22, 2004, Carol D. Gold, Director Employee Plans.

(5.) See Treas. Reg. [section] 1.401(a)(4)-9(c).

(6.) Treas. Reg. [section] 1.401(a)(4)-9(a).

(7.) See Rev. Rul. 81-33, 1981-1 CB 173.

(8.) See Treas. Reg. [section] 1.401(a)(4)-9(b).

(9.) See Treas. Reg. [section] 1.401(a)(4)-9(c)(3)(ii).

(10.) See IRC Sec. 401(a)(5)(D).

(1.) Rev. Proc. 93-42, 1993-2 CB 540.

(2.) Treas. Reg. [section] 1.401(a)(4)-11(d)(3)(iii).

(3.) See Treas. Reg. [section] 1.401(a)(4)-5(b)(3); IRC Sec. 411(a)(11)(A); Rev. Rul. 92-76, 1992-2 CB 76. See also, Treas. Regs. [subsection] 1.401-4(c)(1), 1.401-4(c)(2), 1.401-4(c)(7).

(4.) Let. Ruls. 9631031, 9743051.

(5.) Let. Ruls. 9417031, 9419040.

(6.) 1980-2 CB 133.

(7.) Treas. Regs. [subsection] 1.401(a)(4)-1(b)(3), 1.401(a)(4)-4(a).

(8.) Treas. Reg. [section] 1.401(a)(4)-4(b)(1).

(1.) Treas. Reg. [section] 1.401(a)(4)-4(b)(2).

(2.) Treas. Reg. [section] 1.401(a)(4)-4(c)(1).

(3.) IRC Sec. 414(v)(3)(B).

(4.) See Notice 97-75, 1997-2 CB 337.

(5.) Notice 97-75, 1997-2 CB 337, A-5.

(6.) IRC Sec. 401(a)(5)(F)(ii).

(7.) Rev. Proc. 93-42, 1993-2 CB 540.

(8.) See Rev. Proc. 93-39, 1993-2 CB 513, as modified by Rev. Proc. 94-37, 1994-1 CB 349.

(9.) TAM 9137001.

(1.) Treas. Reg. [section] 1.401(a)(4)-1(b)(4).

(2.) Treas. Reg. [section] 1.401(a)(4)-5(a).

(3.) Treas. Reg. [section] 1.401(a)(4)-5(a)(2).

(4.) Treas. Reg. [section] 1.401(a)(4)-5(a)(3).

(5.) 1980-2 CB 133.

(6.) See Treas. Reg. [section] 1.401(a)(4)-2(b)(3)(i).

(7.) Treas. Reg. [section] 1.401(a)(4)-8(b)(1)(vi)(A).

(1.) Treas. Reg. [section] 1.401(a)(4)-8(b)(1)(vi)(B).

(2.) Treas. Reg. [section] 1.401(a)(4)-8(b)(1)(iii)(A).

(3.) Rev. Rul. 2001-30, 2001-1 CB 46.

(4.) Treas. Reg. [section] 1.401(a)(4)-8(b)(1)(vii).

(5.) See Treas. Reg. [section] 1.401(a)(4)-8(b)(1)(iii)(B).

(6.) Treas. Reg. [section] 1.401(a)(4)-8(b)(1)(iv)(A).

(7.) See Treas. Reg. [section] 1.401(a)(4)-8(b)(3).

(8.) See Treas. Reg. [section] 1.401(a)(4)-8(b)(1)(v).

(9.) Treas. Reg. [section] 1.401(a)(4)-9(b)(2)(v)(A) and (D).

(10.) See Treas. Reg. [section] 1.401(a)(4)-9(b)(1)(v)(B) and (C).

(11.) Memorandum dated October 22, 2004, Carol D. Gold, Director Employee Plans.

(1.) IRC Sec. 401(a)(5)(C).

(2.) Treas. Reg. [section] 1.401(1)-1(a)(1).

(3.) Treas. Reg. [section] 1.401(1)-1(a)(3).

(4.) Treas. Reg. [section] 1.401(1)-1(a)(4).

(5.) Treas. Regs. [subsection] 1.401(1)-2(a)(2), 1.401(1)-1(c)(16)(ii).

(6.) IRC Sec. 401(1)(2).

(7.) Treas. Regs. [subsection] 1.401(1)-2(a)(3), 1.401(1)-2(b).

(8.) Treas. Regs. [subsection] 1.401(1)-2(b)(1), 1.401(1)-5.

(9.) Treas. Regs. [subsection] 1.401(1)-2(a)(4), 1.401(1)-2(c).

(10.) IRC Sec. 401(1)(2)(B).

(1.) Treas. Regs. [subsection] 1.401(1)-2(a)(5), 1.401(1)-2(d).

(2.) IRC Sec. 401(1)(5)(A).

(3.) See Treas. Reg. [section] 1.401(a)(4)-8(b)(3)(i)(C).

(4.) Treas. Reg. [section] 1.401(a)(4)-8(c)(3)(iii)(B).

(5.) IRC Sec. 401(a)(5)(D)(i); Treas. Reg. [section] 1.401(a)(5)-1(d)(2).

(6.) IRC Sec. 401(a)(5)(D)(ii).

(7.) Treas. Reg. [section] 1.401(a)(5)-1(e)(2); IRC Sec. 401(a)(17).

(8.) Treas. Reg. [section] 1.401(1)-3(a)(2).

(9.) Treas. Regs. [subsection] 1.401(1)-3(a)(3), 1.401(1)-3(b)(1).

(10.) Treas. Reg. [section] 1.401(1)-3(b)(2).

(11.) IRC Sec. 401(1)(4)(A).

(12.) Treas. Reg. [section] 1.401(1)-3(b)(3).

(13.) IRC Sec. 401(1)(4)(B).

(14.) Treas. Reg. [section] 1.401(1)-3(b)(1).

(1.) Treas. Regs. [subsection] 1.401(1)-3(a)(4), 1.401(1)-3(c)(1).

(2.) Treas. Reg. [section] 1.401(1)-3(d). See IRC Sec. 401(1)(5)(A).

(3.) Treas. Reg. [section] 1.401(1)-3(c)(2)(ix).

(4.) Treas. Reg. [section] 1.401(1)-1(c)(7)(i).

(5.) See Rev. Rul. 2009-2, 2009-2 IRB 245 for the 2009 covered compensation table.

(6.) IRC Sec. 401(1)(5)(C). Treas. Regs. [subsection] 1.401(1)-1(c)(2), 1.401(a)(4)-3(e)(2).

(7.) IRC Sec. 401(1)(5)(D); Treas. Reg. [section] 1.401(1)-1(c)(17).

(8.) Treas. Regs. [subsection] 1.401(1)-3(d)(9), 1.401(1)-3(e).

(9.) See Treas. Reg. [section] 1.401(1)-3.

(10.) Treas. Reg. [section] 1.401(1)-5.

(11.) Treas. Reg. [section] 1.401(1)-5(b)(1).

(1.) Treas. Regs. [subsection] 1.401(1)-5(c)(1)(i), 1.401(1)-5(c)(2).

(2.) IRC Secs. 401(a)(17), 414(s)(1); IR-2009-94, Oct. 15, 2009.

(3.) IRC Sec. 401(a)(17); see Treas. Reg. [section] 1.401(a)(17)-1(a).

(4.) Treas. Regs. [subsection] 1.414(s)-1(c)(2), 1.415(c)-2, 1.416-1, T-21.

(5.) IRC Sec. 415(c)(3)(D).

(6.) Rev. Proc. 93-42, 1993-2 CB 540.

(7.) IRC Sec. 414(s)(3).

(8.) Treas. Reg. [section] 1.414(s)-1(c)(3).

(9.) Treas. Reg. [section] 1.414(s)-1(e).

(10.) IRC Sec. 414(s)(2); Treas. Reg. [section] 1.414(s)-1(c)(4).

(1.) Treas. Reg. [section] 1.414(s)-1(d).

(2.) See Treas. Regs. [subsection] 1.414(s)-1(d)(3)(iii)(B), 1.414(s)-1(g).

(3.) See IRC Sec. 401(a)(16); Treas. Reg. [section] 1.415(a)-1(d).

(4.) IRC Sec. 415(b)(1); IR-2009-94, Oct. 15, 2009.

(5.) IRC Sec. 415(c); IR-2009-94, Oct. 15, 2009. 6 . Treas. Reg. [section] 1.415(j)-1(a).

(7.) Treas. Reg. [section] 1.415(a)-1(a)(3); Martin Fireproofing Profit Sharing Plan and Trust v. Comm., 92 TC 1173 (1989).

(8.) 72 Fed. Reg. 16878 (April 15, 2007).

(9.) Treas. Reg. [section] 1.415(a)-1(f)(6).

(10.) IRC Secs. 415(g), 415(h), 414(m); see Treas. Reg. [section] 1.415(a)-1(f)(2).

(1.) Treas. Reg. [section] 1.415(a)-1(d)(3).

(2.) IRC Sec. 401(a)(7).

(3.) IRC Sec. 411(a).

(4.) IRC Sec. 411(a)(8).

(5.) IRC Sec. 411(a)(1).

(6.) IRC Sec. 411(a)(2)(A)(ii); see Temp. Treas. Reg. [section] 1.411(a)-3T(b).

(7.) IRC Sec. 411(a)(2)(A)(iii); see Temp. Treas. Reg. [section] 1.411(a)-3T(c).

(8.) IRC Sec. 411(a)(2)(B)(ii).

(9.) IRC Sec. 411(a)(2)(B)(iii).

(1.) See IRC Sec. 411(a)(2) prior to amendment by PPA 2006 and IRC Sec. 411(a)(12) prior to repeal by PPA 2006.

(2.) Temp. Treas. Reg. [section] 1.411(a)-3T(a)(2).

(3.) ERISA Conf. Comm. Report, 1974-3 CB 437.

(4.) Prop. Treas. Reg. [section] 1.411(d)-1; IR 80-85.

(5.) IRC Sec. 411(a)(11)(A).

(6.) IRC Sec. 401(a)(31(B); Labor Reg. [section] 2550.404a-2.

(7.) IRC Sec. 411(a)(11)(B); see also Notice 2004-78, 2004-48 IRB 879.

(8.) See IRC Sec. 411(a)(11)(D).

(9.) See Rev. Rul. 2004-10, 2004-7 IRB 484.

(10.) IRC Sec. 411(a)(11).

(11.) See Treas. Reg. [section] 1.411(a)-11; Treas. Reg. [section] 1.401(a)-21.

(12.) Treas. Reg. [section] 1.411(a)-11(c)(2)(i).

(13.) Rev. Rul. 96-47, 1996-2 CB 35.

(14.) IRC Secs. 411(b)(1)(H), 411(b)(2).

(1.) IRC Sec. 411(a)(10); see Temp. Treas. Reg. [section] 1.411(a)-8T(b).

(2.) IRC Sec. 411(a)(3)(A).

(3.) Rev. Rul. 91-4, 1991-1 CB 54.

(4.) IRC Sec. 411(a)(3)(B).

(5.) See Labor Reg. [section] 2530.203-3; Rev. Rul. 81-140, 1981-1 CB 180; Notice 82-23, 1982-2 CB 752.

(6.) IRC Sec. 411(d)(3); Treas. Reg. [section] 1.411(d)-2.

(7.) Rev. Rul. 2002-42, 2002-2 CB 76.

(8.) Rev. Rul. 80-146, 1980-1 CB 90.

(9.) Rev. Rul. 80-277, 1980-2 CB 153.

(1.) Alessi v. Raybestos-Manhattan, Inc.; Buczynski v. General Motors Corp., 47 AFTR 2d 81-1513 (Sup. Ct. 1981).

(2.) Spitzler v. New York Post Corp., 620 F.2d 19 (2nd Cir. 1980).

(3.) Rev. Rul. 76-259, 1976-2 CB 111.

(4.) See Rev. Rul. 84-69, 1984-1 CB 125. See also Board of Trustees ofN.Y. Hotel Trades Council & Hotel Assoc. of N.Y. City, Inc. Pension Fund v. Comm., TC Memo 1981-597, app. dismissed (2nd Cir. 1982); Trustees of the Taxicab Indus. Pension Fund v. Comm., TC Memo 1981-651; Caterpillar Tractor Co. v. Comm., 72 TC 1088 (1979).

(5.) Rev. Rul. 81-211, 1981-2 CB 98.

(6.) IRC Sec. 411(a); Treas. Reg. [section] 1.411(a)-7.

(7.) IRC Sec. 411(a)(5).

(8.) Treas. Regs. [subsection] 1.411(a)-5, 1.411(a)-6.

(9.) Temp. Treas. Reg. [section] 1.411(a)-4T(a).

(10.) Rev. Rul. 85-31, 1985-1 CB 153.

(1.) Clark v. Lauren Young Tire Center Profit Sharing Trust, 816 F.2d 480 (9th Cir. 1987); Noell v. American Design, Inc., 764 F.2d 827 (11th Cir. 1985); Fremont v. McGraw Edison, 606 F.2d 752 (7th Cir. 1979); Hepple v. Roberts &Dybdahl, Inc., 622 F.2d 962 (8th Cir. 1980); Hummell v. S.E. Rykoff&Co., 2 EBC 1417 (9th Cir. 1980).

(2.) See Temp. Treas. Reg. [section] 1.411(a)-4T.

(3.) IRC Sec. 411(d)(6)(A); ERISA Sec. 204(g).

(4.) IRC Sec. 411(d)(6)(B); see Treas. Reg. [section] 1.411(d)-4, A-1(a).

(5.) IRC Sec. 411(d)(6)(B).

(6.) Treas. Reg. [section] 1.411(d)-4, A-2(c).

(7.) IRC Sec. 411(d)(6)(C); Treas. Reg. [section] 1.411(d)-4, A-2(d).

(8.) IRC Sec. 411(d)(6)(D); see Treas. Reg. [section] 1.411(d)-4, A-3(b).

(9.) IRC Sec. 411(d)(6)(E).

(1.) Treas. Reg. [section] 1.411(d)-3(c)(1)(ii).

(2.) Treas. Reg. [section] 1.411(d)-3(c)(4).

(3.) See Treas. Reg. [section] 1.411(d)-3(c)(2)(ii).

(4.) Treas. Reg. [section] 1.411(d)-3(d).

(5.) Treas. Reg. [section] 1.411(d)-3(g)(5).

(6.) TAM 9735001.

(7.) See TAM 9735001.

(8.) Hickey v. Chicago Truck Drivers, Helpers and Warehouse Workers Union, 980 F.2d 1080 (7th Cir. 1992).

(9.) Auwater v. Donohue Paper Sales Corp. Defined Benefit Pension Plan, 93-1 USTC 1150,096 (E.D. NY 1992).

(10.) Central Laboorers' Pension Fund v. Heinz, 124 S.Ct. 2230 (2004).

(11.) See Rev. Proc. 2005-23, 2005-18 IRB 991.

(12.) See TD 9280, 71 Fed. Reg. 45379 (Aug. 9, 2006).

(1.) See Edsen v. Bank of Boston, 2002-2 USTC [paragraph] 50,738 (2nd Cir. 2000).

(2.) See Rev. Rul. 81-12, 1981-1 CB 228.

(3.) See Hickey v. Chicago Truck Drivers, Helpers and Warehouse Workers Union, 980 F.2d 1080 (7th Cir. 1992).

(4.) Sheet Metal Workers' Nat'l Pension Fund Bd. of Trustees v. Comm., 117 TC 220 (2001), aff'd 2003-1 USTC [paragraph] 50,221 (4th Cir. 2003).

(5.) Treas. Reg. [section] 1.411(d)-4, A-2(b)(2)(x).

(6.) See, e.g., Rev. Proc. 94-13, 1994-1 CB 566 (reduction of compensation limit under IRC Sec. 401(a)(17)); Notice 99-44, 1999-2 CB 326 (repeal of combined plan limit).

(7.) See Treas. Reg. [section] 1.411(d)-4, A-2(d), A-11.

(8.) See Treas. Reg. [section] 1.411(d)-4, A-10.

(9.) Treas. Reg. [section] 1.411(d)-4, A-1(d); see Rev. Rul. 96-47, 1996-2 CB 35. 10.See Treas. Reg. [section] 1.411(d)-4, A-1(d).

(11.) Rev. Rul. 92-66, 1992-2 CB 92.

(12.) ERISA Sec. 204(h).

(13.) IRC Sec. 412(d)(2).

(1.) IRC Sec. 412(c)(2).

(2.) See Let. Rul. 9736044.

(3.) IRC Sec. 401(a)(11)(B).

(4.) IRC Sec. 401(a)(11)(B); Treas. Reg. [section] 1.401(a)-20, A-3.

(5.) IRC Secs. 401(a)(11)(C), 409(h).

(6.) IRC Sec. 401(a)(11); Treas. Reg. [section] 1.401(a)-20.

(7.) Treas. Reg. [section] 1.401(a)-20, A-25.

(8.) Treas. Reg. [section] 1.401(a)-20, A-11.

(9.) IRC Sec. 417(e)(1); Treas. Reg. [section] 1.417(e)-1(b)(2)(i).

(1.) IRC Sec. 417(f)(2); Treas. Reg. [section] 1.401(a)-20, A-10(b)(2).

(2.) Treas. Reg. [section] 1.401(a)-20, A-12.

(3.) IRC Sec. 417(b).

(4.) Treas. Reg. [section] 1.401(a)-20, A-16.

(5.) Treas. Reg. [section] 1.401(a)-20, A-17.

(6.) Treas. Reg. [section] 1.401(a)-20, A-20.

(7.) IRC Sec. 417(c); Treas. Reg. [section] 1.401(a)-20, A-18.

(8.) Sen. Fin. Comm. Rep. to P.L. 98-397. See Rev. Rul. 85-15, 1985-1 CB 132.

(1.) Treas. Reg. [section] 1.401(a)-20, A-22.

(2.) IRC Sec. 417(a)(1)(A).

(3.) See IRC Sec. 417(g).

(4.) IRC Sec. 417(d); Treas. Reg. [section] 1.401(a)-20, A-25(b)(2).

(5.) IRC Sec. 417(a)(3); see TD 9256, 71 Fed. Reg. 14798.

(6.) See Treas. Reg. [section] 1.401(a)-21.

(7.) IRC Sec. 417(a)(7).

(8.) See Treas. Reg. [section] 1.417(e)-1(b)(3)(iv).

(9.) IRC Sec. 417(a)(7)(B); TD 8796, 1999-1 CB 344.

(1.) See Treas. Reg. [section] 1.417(a)(3)-1(f)(1).

(2.) IRC Secs. 417(a)(3), 417(a)(5); See Treas. Reg. [section] 1.401(a)-20, A-37.

(3.) IRC Sec. 417(e)(3), prior to amendment by PPA 2006; Treas. Reg. [section] 1.417(e)-1(d)(4).

(4.) See IRC Sec. 417(e)(3).

(5.) Treas. Regs. [subsection] 1.401(k)-2(b)(2)(vii)(A).

(6.) IRC Secs. 417(a)(1), 417(a)(4); Treas. Reg. [section] 1.401(a)-20, A-24.

(7.) Treas. Reg. [section] 1.401(a)-20, A-24(b).

(8.) See Mendez-Bellido v. Board of Trustees of Div. 1181, 709 F. Supp. 329 (E.D. NY 1989). See also, Let. Ruls. 8908063, 8905058.

(9.) George Pfau's Sons Co. v Neal, 1996 Ind. App. Lexis 671 (Ct. App. Ind. 1996).

(10.) IRC Sec. 417(a)(1)(a).

(1.) See IRC Sec. 417(a)(1)(a).

(2.) IRC Sec. 417(a)(2); Treas. Reg. [section] 1.401(a)-20, A-31.

(3.) See Treas. Reg. [section] 1.401(a)-20, A-27.

(4.) IRC Sec. 417(a)(2); Treas. Reg. [section] 1.401(a)-20, A-29.

(5.) See Lasche v. George W. Lasche Basic Profit Sharing Plan, 1997 U.S. App. Lexis 9986 (11th Cir. 1997).

(6.) Profit Sharing Plan for Employees of Republic Fin. Services, Inc. v. MBank Dallas, N.A., 683 F. Supp. 592 (N.D. Tex. 1988). But see United Parcel Service, Inc. v. Riley, 532 N.Y.S.2d 473 (1988).

(7.) Treas. Reg. [section] 1.401(a)-20, A-28; Hurwitz v. Sher, 982 F.2d 778 (2nd Cir. 1992), cert. denied 113 S.Ct. 2345; Nellis v. Boeing, 1992 U.S. Dist. Lexis 8510 (D.C. Kan. 1992).

(8.) See also, Pedro Enter., Inc. v. Perdue, 998 F.2d 491 (7th Cir. 1993).

(9.) See Hagwood v. Newton, 27 EBC 1882 (4th Cir. 2002).

(10.) National Auto. Dealers and Assoc. Retirement Trust v. Arbeitman, 89 F.3d 496 (8th Cir. 1996).

(11.) Estate of Altobelli v. IBM, 77 F.3d 78 (4th Cir. 1996).

(1.) IRC Sec. 417(a)(5).

(2.) See IRC Sec. 417(a)(6)(A).

(3.) Treas. Reg. [section] 1.417(e)-1(b)(1).

(4.) See Treas. Reg. [section] 1.417(e)-1(b)(3); IRC Sec 417(a)(b)(A).

(5.) Treas. Reg. [section] 1.417(e)-1(b)(3)(ii).

(6.) Jacobs v. Reed College TIAA-CREF Retirement Plan, 1990 U.S. Dist. LEXIS 14614 (D. Ore 1990).

(7.) IRC Sec. 417(a)(6)(B).

(8.) See Treas. Reg. [section] 1.417(e)-1(b)(3)(ii).
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Title Annotation:FEDERAL INCOME TAX ON INSURANCE AND EMPLOYEE BENEFITS
Publication:Tax Facts on Insurance and Employee Benefits
Date:Jan 1, 2010
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