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Required minimum distributions.

341. When is a qualified plan required to offer distributions from a qualified plan? What is a TEFRA 242(b) election?

A plan must meet two separate sets of rules with regard to the commencement of benefits: first, a plan must provide that, unless a participant elects otherwise, payments of benefits to him begin within 60 days after the close of the latest of: (1) the plan year in which the participant attains the earlier of age 65 or the normal retirement age specified under the plan, (2) the plan year in which the 10th anniversary of the participant's plan participation occurs, or (3) the plan year in which the participant terminates his service with the employer. (1) Second, a plan must meet the minimum distribution requirements set forth at IRC Section 401(a)(9) and explained at Q 342 to Q 348.

TEFRA Section 242(b)(2) Election. A participant is not subject to the minimum distribution requirements if he designated, before January 1,1984, a method of distribution that would have been permissible under pre-TEFRA law. (2) The final regulations published in April, 2002 stated that the transitional election rule inTEFRA Section 242(b)(2) was preserved, and that a plan will not be disqualified merely because it pays benefits in accordance with such an election.

342. What are the "minimum distribution" requirements for qualified plans?

To be qualified, a plan must set forth the statutory rules of IRC Section 401(a)(9), including the incidental death benefit requirement in IRC Section 401(a)(9)(G). The plan must also provide that distributions will be made in accordance with the minimum distribution requirements set forth in Treasury regulations, as explained below. For an overview, see the Minimum Distribution Navigator. In addition, the plan must provide that the minimum distribution rules override any distribution options offered under the plan that are inconsistent with these requirements. (3)

The minimum distribution requirements include the rules prescribed by the IRS and Treasury for meeting the Code's requirements. Regulations finalized in 2002 govern all issues except annuity distributions from defined benefit plans, which were addressed by regulations finalized in 2004. (4) See Q 345. Regulations making governmental plans subject to only a "reasonable, good faith interpretation" of the minimum distribution requirements under Section 401(a)(9) are authorized by PPA 2006. (5)

Unless otherwise noted, the questions that follow explain the rules set forth in the final 2002 and 2004 regulations. The regulations themselves are complex, and should be reviewed carefully with regard to any specific case. See Q 343 for an explanation of the required beginning date, Q 344 regarding the minimum distribution requirements from individual accounts during the employee's lifetime, Q 345 regarding annuity payouts from defined benefit plans, Q 346 for after-death distribution requirements, Q 347 regarding designated beneficiaries, and Q 348 regarding the effect of a qualified domestic relations order on required distributions.

Failure to make minimum distributions. Although a plan that fails in its operation to meet the minimum distribution requirements with respect to all required distributions is technically subject to disqualification, the preamble to the 2001 proposed regulations stated that such failures could be corrected through the Employee Plans Compliance Resolution System (EPCRS). (6)

Besides the qualification implications, if an amount distributed from a plan is less than the required minimum distribution, an excise tax equal to 50% of the shortfall is generally levied against the individual (not the plan). (1) See Q 350. However, the tax may be waived if the payee establishes to the satisfaction of the IRS that the shortfall is due to reasonable error, and that reasonable steps are being taken to remedy the shortfall. (2) Generally, the excise tax will be waived automatically if the beneficiary is an individual whose minimum distribution amount is determined under the life expectancy rule for after-death distributions, and the entire benefit to which that beneficiary is entitled is distributed under the 5-year rule. (3)

Planning Point: WRERA 2008 provided that RMDs from defined contribution plans and IRAs for calendar year 2009 are waived. Also, the five year rule is determined without regard to 2009. A person who received a RMD for 2009 (including a distribution for 2009 made as late as April 1, 2010) has until the later of 60 days of receiving the RMD or November 30, 2009 to roll over the RMD to an IRA or other retirement plan (assuming the roll-over would otherwise qualify). (4)

The minimum distribution requirements will not be treated as violated and, thus, the 50% excise tax will not apply where a shortfall occurs because assets are invested in a contract issued by an insurance company in state insurer delinquency proceedings. To the extent that a distribution otherwise required under IRC Section 401(a)(9) is not made during the state insurer delinquency proceedings, this amount and any additional amount accrued during this period will be treated as though it is not vested. (5)

343. What is an individual's "required beginning date" for purposes of required minimum distributions from a qualified plan?

In order to be qualified, a plan must provide that the entire interest of each employee will be distributed not later than his required beginning date, or will be distributed beginning not later than the required beginning date over certain prescribed time periods. (6)

For purposes of the minimum distribution rules explained in Q 342 to Q 348, and the minimum distribution incidental benefit rule explained in Q 349, the term "required beginning date" means April 1 of the calendar year following the later of (a) the year in which the employee attains age 70/, or (b) the year in which the employee (other than a 5% owner) retires from the employer maintaining the plan. (7)

In the case of a 5% owner, "required beginning date" means April 1 of the calendar year following the year in which the employee attains age 70 1/2. (8) However, the IRS determined that where a 5% owner rolled over his account balance to the plan of another employer in which he was not a 5% owner (after receiving the required distribution for the year in question), he could delay distributions from the new plan until his retirement after age 70/. (9)

A plan is permitted to provide that the required beginning date for all employees is April 1 of the calendar year following the calendar year in which the employee attains age 70/, regardless of whether the employee is a 5% owner. (10)

Annuity payout. If distributions began irrevocably (except for acceleration) prior to the required beginning date in the form of an annuity that meets the minimum distribution rules, the annuity starting date will be treated as the required beginning date for purposes of calculating lifetime and after death minimum distribution requirements. (1) See Q 345.

An individual reaches age 70 1/2 on the date that is six calendar months after his 70th birthday. For example, if an employee's date of birth was June 30, 1939, he would reach age 70 on June 30, 2009, and he would reach age 70 1/2 on December 30, 2009. Consequently, assuming he is retired or a 5% owner, his required beginning date would be April 1, 2010. (Since distributions from a defined contribution plan are waived for 2009, a distribution from a defined contribution plan would not be required until December 31, 2010.) However, if the same employee's birthday were July 1, 1939, he would reach age 70 1/2 on January 1, 2010, and his required beginning date would be April 1, 2011. (2)

344. What are the minimum distribution requirements for individual account plans during the lifetime of the employee?

In order to satisfy IRC Section 401(a)(9)(A), the entire interest of each employee must either be distributed to the employee in its entirety not later than the required beginning date, or must be distributed starting not later than the required beginning date over the life (or life expectancy) of the employee (or the employee and a beneficiary). (3)

Planning Point: RMDs are waived for 2009. A distribution for 2009 that must be made by December 31, 2009 can be waived. A distribution for 2009 that must be made by a beginning date of April 1, 2010 can also be waived. But a distribution for 2008 that is made by a beginning date of April 1, 2009 cannot be waived.

Uniform Lifetime Table. Required minimum distributions from an individual account under a defined contribution plan during the owner's lifetime are calculated by dividing the employee's account balance by the applicable distribution period determined from the RMD Uniform Lifetime Table found in Appendix F. (4) For an example showing the calculation under this rule, see Q 235. The amount of an individual's lifetime required distribution is calculated without regard to the beneficiary's age, except in the case of a spouse beneficiary who is more than 10 years younger than the employee. (5)

If the sole designated beneficiary is the employee's spouse, the distribution period during the employee's lifetime is the longer of (a) the uniform lifetime table, or (b) the joint and survivor life expectancy of the employee and spouse using their attained ages in the distribution calendar year. (6) As a practical matter, the joint and survivor life expectancy table will produce a longer (and thus, lower) payout only if the spouse beneficiary is more than 10 years younger than the employee.

Account balance. For purposes of calculating minimum distributions, the account balance is determined as of the last valuation date in the immediately preceding calendar year (i.e., the valuation calendar year). (7) The account balance is increased by the amount of any contributions or forfeitures allocated to the employee's account as of dates in the valuation calendar year after the valuation date. Contributions include contributions made after the close of the valuation calendar year that are allocated as of a date in the valuation calendar year. (1) The account balance is decreased by any distributions made during the valuation calendar year, after the valuation date. (2)

Employee not fully vested. If a portion of an employee's individual account is not vested as of his required beginning date, the benefit used to calculate the required minimum distribution for any year is determined without regard to whether all of the benefit is vested, and distributions will be treated as being paid from the vested portion of the benefit first. If the required minimum distribution amount is greater than the vested benefit, only the vested portion is required to be distributed. (3) In any event, the required minimum distribution amount will never exceed the entire vested account balance on the date of distribution. (4) The required minimum distribution for subsequent years, however, must be increased by the sum of amounts not distributed in prior calendar years because the employee's vested benefit was less than the required minimum distribution amount. (5)

Special rules. Generally, distributions made prior to an individual's required beginning date are not subject to these rules. However, if distributions begin under a distribution option (such as an annuity) that provides for payments after the individual's required beginning date, distributions that will be made under the option on and after such date must satisfy these rules or the entire option fails from the beginning. (6)

Distributions in excess of the amounts required under these rules do not reduce the amount required in subsequent years. (7) Roll-overs and transfers among plans during years in which distributions are required under these rules can have a significant effect on the application of the minimum distribution rules. (8) For rules that apply to distributions when a QDRO is in effect, see Q 348. Rules pertaining to separate accounts or segregated shares under a single plan, to employees participating in more than one plan, and other special rules affecting the application of the minimum distribution requirements, are set forth at Treas. Reg. [section] 1.401(a)(9)-8.

Distributions made in accordance with the provisions set forth in Treas. Reg. [section] 1.401(a)(9)-5, as explained above, will satisfy the minimum distribution incidental benefit requirement (see Q 349). (9)

345. What are the minimum distribution requirements for annuity payouts from a defined benefit plan?

Annuity distributions from a defined benefit plan must be paid in periodic payments at least annually, for the employee's life (or the joint lives of an employee and beneficiary), or over a period certain that is not longer than the life expectancy (or joint and survivor life expectancy) of the employee (or the employee and a beneficiary), as set forth in the Code's provisions for lifetime and after death distributions. (10) The annuity may also be a life annuity (or joint and survivor annuity) with a period certain, as long as the life (or lives) and period certain each meet the foregoing requirements. (11)

Regulations set forth requirements that annuity distributions under a defined benefit plan must meet to satisfy IRC Section 401(a)(9)(A). (12) While the regulations do not address annuity distributions from defined contribution plans, the IRS has ruled privately that a fixed or variable annuity could be used to satisfy the minimum distribution requirements from a profit sharing or money purchase plan. (1)

Distributions from an annuity contract must commence on or before the employee's required beginning date. The first payment must be the payment that is required for one payment interval. The second payment need not be made until the end of the next payment interval, even if the interval ends in the next calendar year. (2) Examples of payment intervals include monthly, bimonthly, semi-annually, and annually. All benefit accruals as of the last day of the first distribution calendar year must be included in the calculation of the amount of the life annuity payments for payment intervals ending on or after the employee's required beginning date. (3)

Period certain limitations. Generally, the period certain for annuity distributions commencing during the life of an employee, with an annuity starting date on or after the required beginning date, may not exceed the amount set forth in the "Uniform Lifetime Table" in Appendix F. However, if an employee's spouse is the sole beneficiary as of the annuity starting date, and the annuity provides only a period certain and no life annuity, the period certain may be as long as the joint and survivor life expectancy of the employee and spouse, based on their ages as of their birthdays in the calendar year that contains the annuity starting date. (4)

Employee notfully vested. If any portion of the employee's benefit is not fully vested as of his required beginning date, his required minimum distribution will be calculated as though the portion that is not vested has not yet accrued. As additional vesting occurs, such amounts will be treated as additional accruals.5 If additional benefits accrue after the participant's required beginning date, such amounts will be treated separately for purposes of the minimum distribution rules. (6)

Actuarial increase requirement. If an employee (other than a 5% owner) retires after the calendar year he reaches age 70 1/2, a defined benefit plan must actuarially increase the employee's accrued benefit to take into account any period after age 70 1/2 during which the employee was not receiving benefits under the plan. (7) Generally, the increase must be provided starting on April 1 of the year after the employee reaches age 70 1/2, and ending on the date when required minimum distributions commence in an amount sufficient to satisfy the Code requirements. (8) This actuarial increase requirement does not apply to: (1) plans that provide the same required beginning date (i.e., April 1 of the year after the employee reaches age 70 1/2) for all employees, regardless of whether they are 5% owners, and make distributions accordingly; or (2) governmental or church plans. (9)

Nonincreasing annuity requirement. Except as otherwise provided (see below) annuity payments must be nonincreasing, or increase only in accordance with: (1) an annual percentage not exceeding that of an eligible cost-of-living index (e.g., one issued by the Bureau of Labor Statistics, or certain others defined in the regulations); (2) a percentage increase that occurs at specified times (e.g., at specified ages) and does not exceed the cumulative total of annual percentage increases in an eligible cost of living index (see (1)) since the annuity starting date; (3) increases to the extent of the reduction in the amount of the employee's payments to provide for a survivor benefit upon death (if the beneficiary dies or is no longer subject to a QDRO); (4) increases that result from a plan amendment; or (5) increases to allow a beneficiary to convert the survivor portion of a joint and survivor annuity into a single sum distribution upon the employee's death. (1)

Additional permitted increases for annuity contracts purchased from insurance companies. If the total future expected payments from an annuity purchased from an insurance company exceed the total value being annuitized, payments under the annuity will not fail to satisfy the nonincreasing payment requirement merely because the payments are increased in accordance with one or more of the following: (1) by a constant percentage, applied not less frequently than annually; (2) to provide a final payment upon the employee's death that does not exceed the excess of the total value being annuitized over the total of payments before the death of the employee; (3) as a result of dividend payments or other payments resulting from certain actuarial gains; and (4) an acceleration of payments under the annuity (as defined in the regulations). (2)

Additional permitted increases for annuity payments from a qualified trust. In the case of annuity payments paid under a qualified defined benefit plan (i.e., paid directly from the trust rather than a commercial annuity), payments will not fail to satisfy the nonincreasing payment requirement merely because the payments are increased in accordance with one or more of the following: (1) by a constant percentage, applied not less frequently than annually, at a rate that is less than 5% per year; (2) to provide a final payment upon the death of the employee that does not exceed the excess of the actuarial present value of the employee's accrued benefit (as defined in the regulations) over the total of payments before the death of the employee; or (3) as a result of dividend payments or other payments resulting from actuarial gain (measured and paid as specified in the regulations). (3)

An annuity contract purchased with the employee's benefit by the plan from an insurance company will not fail to satisfy the rules of Section 401(a)(9) merely because of the purchase, provided the payments meet the foregoing requirements. (4) If the annuity contract is purchased after the required beginning date, the first payment interval must begin on or before the purchase date, and the payment amount required for one interval must be made no later than the end of that payment interval. (5)

Changes in form of distribution. In addition to the foregoing permitted increases, the final regulations permit the employee or beneficiary to change the form of distributions in response to various changes in circumstances. The annuity stream must otherwise satisfy the regulations, and certain other requirements must be met (e.g., the new payout must satisfy IRC Sec. 401(a)(9), and the modification must be treated as a new annuity starting date under Sections 415 and 417. (6) If these conditions are met, the annuity payment period may be changed and the payments may be modified if: (1) the modification occurs at the time the employee retires, or in connection with a plan termination; (2) the annuity payments prior to modification are annuity payments paid over a period certain without life contingencies; or (3) the employee gets married and the annuity payments after modification are paid under a qualified joint and survivor annuity over the joint lives of the employee and spouse. (7)

Payments to children. Payments under a defined benefit plan or annuity contract that are made to an employee's surviving child (8) until the child reaches the age of majority may be treated (for required minimum distribution purposes) as having been paid to the surviving spouse, provided that once the child reaches the age of majority, they are payable to the surviving spouse. For this purpose, a child under age 26 who has not completed "a specified course of education" may be treated as not having reached the age of majority. Furthermore, a child who is disabled may be treated as not having reached the age of majority as long as the child continues to be disabled. The child will not be taken into consideration for purposes of the MDIB requirement and the increase in payments to the surviving spouse that results when the child recovers or reaches the age of majority will not be considered an increase for purposes of the nonincreasing annuity requirement. (1)

Special rules. The distribution of an annuity contract is not a distribution for purposes of meeting the required minimum distribution requirements of IRC Section 401(a)(9). (2) If the employee's entire accrued benefit is paid in the form of a lump sum distribution, the portion that is a required minimum distribution will be determined by treating the distribution either (1) as if it were from an individual account plan (see Q 344), or (2) as if it were an annuity that would satisfy the regulations with an annuity starting date on the first day of the distribution calendar year for which the required minimum distribution is being determined, and one year of annuity payments constitutes the required minimum distribution. (3)

In the case of an annuity contract under an individual account plan that has not yet been annuitized, the required minimum distribution for the period prior to the date annuity payments commence is determined by treating the value of an employee's entire interest under an annuity contract as an individual account. Thus, the required minimum distribution would be determined under Treas. Reg. [section] 1.401(a)(9)-5 (rules for individual account plans, see Q 344).

Regulations making governmental plans subject to only a "reasonable, good faith interpretation" of the minimum distribution requirements under Section 401(a)(9) are authorized by PPA 2006. (4)

346. How are the minimum distribution requirements met after the death of the employee?

The minimum distribution requirements that apply after the death of an employee depend on whether he died before or after his required beginning date. Generally, for this purpose, distributions are treated as having begun in accordance with the minimum distribution requirements under IRC Section 401(a)(9)(A)(ii), without regard to whether payments have been made before that date. (5) However, if distributions irrevocably (except for acceleration) began prior to the required beginning date in the form of an annuity that satisfies the minimum distribution rules (see Q 345), the annuity starting date will be treated as the required beginning date for purposes of calculating lifetime and after death minimum distribution requirements. (6) For the definition of required beginning date, see Q 343. For details on the ability of a nonspouse designated beneficiary to roll over funds from a qualified plan account to an inherited IRA, see Q 463.

Planning Point: RMDs are waived for 2009. A distribution for 2009 that must be made by December 31, 2009 can be waived. A distribution in the year after death that would ordinarily be required by the end of 2009 is not required until the end of 2010.

Death Before Required Beginning Date

If an employee dies before his required beginning date, distributions must be made under one of two methods:

(1) Life expectancy rule: if any portion of the interest is payable to, or for the benefit of, a designated beneficiary, that portion must be distributed over the life (or life expectancy) of the beneficiary, beginning within one year of the employee's death. (1)

To the extent that the interest is payable to a nonspouse beneficiary, distributions must begin by the end of the calendar year immediately following the calendar year in which the employee died. (2) The nonspouse beneficiary's life expectancy for this purpose is measured as of his birthday in the year following the year of the employee's death. In subsequent years, this amount is reduced by one for each calendar year that has elapsed since the year immediately following the year of the employee's death. (3)

(2) Five year rule: if there is no designated beneficiary, or if the foregoing rule is not satisfied, the entire interest must be distributed within five years after the death of the employee (regardless of who or what entity receives the distribution). (4) In order to satisfy this rule, the entire interest must be distributed by the end of the calendar year that contains the fifth anniversary of the date of the employee's death. (5)

Planning Point: If 2009 is one of the five years, the five year period is expanded to six years.

Surviving spouse beneficiary. If the sole designated beneficiary is the employee's surviving spouse, distributions must begin by the later of (i) the end of the calendar year immediately following the calendar year in which the employee died, or (ii) the end of the calendar year in which the employee would have reached age 70 1/2. (6)

In the event that a surviving spouse beneficiary dies after the employee, but before distributions to the spouse have begun, the 5-year rule and the life expectancy rule for surviving spouses will be applied as though the surviving spouse were the employee.7 The payout period during the surviving spouse's life is measured by the surviving spouse's life expectancy as of his or her birthday in each distribution calendar year for which a minimum distribution is required after the year of the employee's death. (8) The provision that treats a surviving spouse as though the surviving spouse were the employee (i.e., the surviving spouse rules of IRC Section 401(a)(9)(B)(iv)) will not allow a new spouse of the deceased employee's spouse to continue delaying distributions. (9)

Life expectancy tables. There are tables with single and joint and survivor life expectancies for calculating required minimum distributions, as well as a "Uniform Lifetime Table," for determining the appropriate distribution periods. (10) See Appendix F.

Plan provisions. Unless a plan adopts a provision specifying otherwise, if distributions to an employee have not begun prior to his death, they must be made automatically either under the life expectancy rule described above, or, if there is no designated beneficiary, under the 5-year rule. (11) A plan may adopt a provision specifying that the 5-year rule will apply after the death of an employee, or a provision allowing employees (or beneficiaries) to elect whether the 5-year rule or the life expectancy rule will be applied. (12)

Death on or After Required Beginning Date

The entire remaining balance must generally be distributed at least as rapidly as under the method of distribution in effect as of the employee's date of death. (1) If the employee dies after distributions have begun, (i.e., generally on or after his required beginning date), but before his entire interest in the plan has been distributed, the method of distribution will depend on whether the distribution was in the form of distributions from an individual account under a defined contribution plan, or annuity payments from a defined benefit plan. (2) If the distributions are annuity payments from a defined benefit plan, they will be determined as explained in Q 345.

The beneficiary must be determined as of September 30 of the year after the year of the employee's death. (3) In the case of an individual account plan, if the employee does not have a "designated beneficiary" (see Q 347) as of that date, his interest is distributed over his remaining life expectancy, using the age of the employee in the calendar year of his death, reduced by one for each calendar year that elapses thereafter. (4)

If the employee does have a designated beneficiary as of the determination date, the beneficiary's interest is distributed over the longer of (i) the beneficiary's life expectancy, calculated as described above at "Life Expectancy Rule" (5) or (ii) the remaining life expectancy of the employee, determined using the age of the employee in the calendar year of his death, reduced by one for each calendar year that elapses thereafter. (6)

347. How is the "designated beneficiary" determined for purposes of the minimum distribution requirements? What are the separate account rules?

A "designated beneficiary" means any individual designated as a beneficiary by the employee. (7) However, an individual may be designated as a beneficiary under the plan either by the terms of the plan or, if the plan so provides, by an affirmative election by the employee (or the employee's surviving spouse) specifying the beneficiary. (8) The fact that an employee's interest under the plan passes to a certain individual under applicable state law, however, does not make that individual a designated beneficiary unless the individual is designated as a beneficiary under the plan. (9) For details on the ability of a nonspouse designated beneficiary to roll over funds from a qualified plan account to an inherited IRA, see Q 463.

A beneficiary designated as such under the plan is an individual (or certain trusts, see below) who is entitled to a portion of an employee's benefit, contingent on the employee's death or another specified event. A designated beneficiary need not be specified by name in the plan or by the employee to the plan in order to be a designated beneficiary so long as the individual who is to be the beneficiary is identifiable under the plan as of the date the beneficiary is determined. However, the choice of beneficiary is subject to the Code's provisions for joint and survivor annuities, QDROs, and consent requirements (see Q 339, Q 340, Q 352). (10) For an explanation of the effect of a QDRO on the minimum distribution requirements, see Q 348. In order to be a designated beneficiary for purposes of minimum distributions, an individual must be a beneficiary on the date of the employee's death. However, the determination of the existence and identity of a designated beneficiary for purposes of minimum distributions is made on September 30 of the calendar year following the year of the employee's death. (1) (Exceptions may apply if the account is payable as an annuity, or if a surviving spouse beneficiary dies after the employee but before distributions have begun.) This is in order that a distribution may be calculated and made by the deadline of December 31 following the year of the employee's death.

Consequently, an individual who was a beneficiary as of the date of the employee's death, but is not a beneficiary as of September 30 of the following year (e.g., because he disclaims entitlement to the benefit or because he receives the entire benefit to which he is entitled before that date) is not taken into account for purposes of determining the distribution period for required minimum distributions after the employee's death. (2) A disclaiming beneficiary's receipt (prior to disclaiming the benefit) of a required distribution in the year after death will not result in the beneficiary being treated as a designated beneficiary for subsequent years. (3)

An entity other than an individual or a trust meeting the requirements set forth below cannot be a designated beneficiary for required minimum distribution purposes. Thus, for example, the employee's estate cannot be a designated beneficiary. (4)

Multiple beneficiaries. If more than one beneficiary is designated with respect to an employee as of the date on which the designated beneficiary is to be determined, the designated beneficiary with the shortest life expectancy is the measuring life for purposes of determining the distribution period. (5) (Special rules, explained below, apply if the employee's benefit is divided into separate accounts, or segregated shares, and the beneficiaries of each account differ.) If an employee has designated multiple beneficiaries, and as of the date on which the designated beneficiary is to be determined one of the beneficiaries is an entity, such as a trust not meeting the requirements above, or a charitable organization, the employee will be treated as having no beneficiaries. (6)

Contingent and successor beneficiaries. If a beneficiary's entitlement to an employee's benefit is contingent on an event other than the employee's death, or the death of another beneficiary, the contingent beneficiary will be considered a designated beneficiary for purposes of determining which designated beneficiary has the shortest life expectancy. (7) The fact that the contingency may be extremely remote (e.g., two children predeceasing a 67-year-old relative) does not appear to affect this outcome. (8) In contrast, if a "successor beneficiary's" entitlement is contingent on the death of another beneficiary, the successor beneficiary's life expectancy cannot be counted for purposes of determining which designated beneficiary has the shortest life expectancy, unless the other beneficiary dies prior to the date on which the beneficiary is determined. (9)

Separate Account Rules

If an employee's benefit is divided into separate accounts under a defined contribution plan (or in the case of a defined benefit plan, into segregated shares) and the separate accounts have different beneficiaries, the accounts do not have to be aggregated for purposes of determining the required minimum distributions for years subsequent to the calendar year in which they were established (or date of death, if later). (1) Separate account treatment is permitted for the year following the year of death, provided the separate accounts are actually established by the end of the calendar year following death.

For purposes of Section 401(a)(9), "separate accounts" are portions of an employee's benefit representing the separate interests of the employee's beneficiaries under the plan as of his date of death. The separate accounting must allocate all post-death investment gains and losses, contributions, and forfeitures for the period prior to the establishment of the separate accounts on a pro rata basis in a reasonable and consistent manner among the accounts. Once the separate accounts are actually established, the separate accounting can provide for separate investments in each account, with gains and losses attributable to such investments allocable only to that account. A separate accounting must also allocate any post-death distribution to the separate account of the beneficiary receiving it. (2)

The "applicable distribution period"is determined for each separate account disregarding the other beneficiaries (i.e., allowing each beneficiary to use his or her own life expectancy) only if the separate account is established no later than December 31 of the year following the decedent's death. (3)

If a trust is the beneficiary of an employee's plan interest, separate account treatment is not available to the beneficiaries of the trust. (4) The IRS has determined repeatedly that the establishment of separate shares did not entitle multiple beneficiaries of the same trust to use their own life expectancies as the distribution period. (5) However, the Service has privately ruled that where separate individual trusts were named as beneficiaries, the ability of each beneficiary to use his or her life expectancy was preserved even though the trusts were governed by a single "master trust." (6)

If the December 31 deadline is missed, or if the plan beneficiary is a trust with multiple beneficiaries, separate accounts may still be established (e.g., for administrative convenience); however, the applicable distribution period will be the shortest life expectancy of the various beneficiaries. (7) The fact that the trust meets the requirements for a "see-through trust" (see below) does not change this result. (8)

Trust Beneficiary

As a general rule, only an individual may be a designated beneficiary for required minimum distribution purposes. However, if special requirements are met, the beneficiaries of a trust may be treated as having been designated as beneficiaries of the employee under the plan for required minimum distribution purposes. "During any period during which required minimum distributions are being determined by treating the beneficiaries of the trust as designated beneficiaries of the employee" the requirements will be met if: (1) the trust is a valid trust under state law, or would be but for the fact that there is no corpus; (2) the trust is irrevocable or will, by its terms, become irrevocable upon the death of the employee; (3) the beneficiaries of the trust who are beneficiaries with respect to the trust's interest in the employee's benefit are identifiable from the trust instrument, as described below; and (4) the documentation described below has been provided to the plan administrator. (9) A trust that satisfies these requirements is sometimes referred to as a "see-through trust."

The IRS has privately ruled that a "see-through" trust's provision for payment of expenses such as funeral and burial costs, probate administration expenses, and estate costs, whether before or after September 30 of the year after the decedent's death, did not preclude the trust from meeting the foregoing requirements. (1)

Beneficiaries identifiable from trust instrument. A designated beneficiary need not be specified by name in the plan or by the employee to the plan in order to be a designated beneficiary, so long as the individual who is to be the beneficiary is identifiable under the plan as of the date the beneficiary is determined (see above). The members of a class of beneficiaries capable of expansion or contraction will be treated as identifiable if it is possible, as of the date the beneficiary is determined, to identify the class member with the shortest life expectancy. (2)

Documentation Requirements

Lifetime distributions. To satisfy the documentation requirement for trust beneficiaries to be treated as designated beneficiaries for purposes of lifetime distributions, the employee must meet one of two requirements:

(1) he must provide to the plan administrator a copy of the trust and agree that if the trust instrument is amended at any time in the future, the employee will, within a reasonable time, provide the plan administrator with a copy of any such amendment; or

(2) he must provide the plan administrator with a list of all the beneficiaries (including contingent and remainder beneficiaries, as well as a description of the conditions on their entitlement) of the trust. If the spouse is the sole beneficiary, a description of the conditions of the remainder beneficiaries' entitlement sufficient to establish that fact must be provided. The employee must certify that to the best of the employee's knowledge, the list is correct and complete, and that the other requirements for the beneficiaries of the trust to be treated as designated beneficiaries have been satisfied. The employee must also agree to provide a copy of the trust instrument upon demand. In any event, if the trust is amended, the employee must provide a copy of any such amendment, or provide a corrected certification to the extent that the amendment changes the information previously certified. (3)

After-death distributions. To satisfy the documentation requirements for required minimum distributions after the death of the employee (or after the death of the surviving spouse, if the spouse dies after the employee but before distributions have begun), the trustee must meet following requirements by October 31 of the calendar year after the year of the employee's death:

(1) he must (a) provide the plan administrator with a final list of all the beneficiaries (including contingent and remainder beneficiaries, as well as a description of the conditions on their entitlement) as of September 30 of the calendar year following the calendar year of the employee's death; (b) certify that to the best of his knowledge the list is correct and complete and that the trust meets the general requirements listed above for all trust beneficiaries; and (c) agree to provide a copy of the trust instrument to the plan administrator upon demand; or

(2) he must provide the plan administrator with a copy of the actual trust document for the trust that is named as a beneficiary of the employee under the plan as of the employee's date of death. (4)

If the foregoing requirements are met, a plan will not fail to satisfy Section 401(a)(9) merely because the actual terms of the trust instrument are inconsistent with the information in the certifications or trust instruments previously provided. However, this relief applies only if the plan administrator reasonably relied on the information provided, and the required minimum distributions for calendar years after the discrepancy is discovered are determined based on the actual terms of the trust instrument. (1) The actual trust terms will govern for purposes of determining the amount of any excise tax under Section 4974 (see Q 350). (2)

348. Who is the employee's spouse or surviving spouse for purposes of the minimum distribution requirements? What is the effect of a QDRO?

For purposes of the minimum distribution requirements under IRC Section 401(a)(9), unless a qualified domestic relations order is in effect (see below) an individual will be considered a spouse or surviving spouse of an employee if that individual is treated under applicable state law as the spouse or surviving spouse of the employee. For purposes of the life expectancy rule applied after an employee's death, the spouse of the employee is determined as of the employee's date of death. (3)

If a portion of an employee's benefit is payable to a former spouse pursuant to a qualified domestic relations order (QDRO, see Q 352), the former spouse to whom the benefit is payable will be treated as a spouse (or surviving spouse, as the case may be) of the employee for purposes of the minimum distribution and MDIB requirements. (4)

If the QDRO provides that the employee's benefit is to be divided and a portion is to be allocated to an alternate payee, that portion will be treated as a separate account (or segregated share) for purposes of satisfying the minimum distribution requirements. For example, distributions from the account will generally satisfy IRC Section 401(a)(9) if required minimum distributions begin not later than the employee's required beginning date, using the rules for individual accounts. (5)

A distribution of the separate account allocated to an alternate payee will satisfy the lifetime distribution requirements if the distribution begins no later than the employee's required beginning date (see Q 343), and is made over the life (or life expectancy) of the payee.

Planning Point: Because of these rules, distributions to a child pursuant to a QDRO can be stretched out over a greater period than would otherwise be allowed under the minimum distribution rules. Martin Silfen, J.D., Brown Brothers Harriman Trust Co., LLC.

If the alternate payee dies after distributions have begun but before the employee dies, distribution of the remaining portion of the benefit allocated to the alternate payee must be made in accordance with the lifetime distribution rules for individual accounts (Q 344) or annuity payouts (Q 345). (6)

If the QDRO provides that a portion of the employee's benefit is to be paid to an alternate payee, but does not provide for the benefit to be divided, the alternate payee's portion will not be treated as a separate account (or segregated share) of the employee. Instead, the alternate payee's portion will be aggregated with any amount distributed to the employee and will be treated, for purposes of meeting the minimum distribution requirement, as if it had been distributed to the employee.7

A plan will not fail to satisfy IRC Section 401(a)(9) merely because it fails to distribute a required amount during the period in which the qualified status of a domestic relations order is being determined, provided it does not extend beyond the 18-month period described in the IRC and ERISA.

Any distributions delayed under this rule will be treated as though they had not been vested at the time distribution was required. (1)

349. What is the "incidental benefit rule" for qualified plans?

The term "incidental benefit rule" or "incidental death benefit rule" is commonly used to refer to two similar, but separate, rules. One limits pre-retirement distributions in the form of nonretirement benefits such as life, accident, or health insurance. (For an explanation of that rule, see Q 427.)The second is a rule more properly referred to as the "minimum distribution incidental benefit (MDIB) rule."The purpose of the MDIB rule is to insure that funds are accumulated under a qualified plan primarily for distribution to the employee participants, and that payments to their beneficiaries are merely "incidental." (2)

The MDIB requirement applies only during the employee's life. (3) The MDIB requirement will be met if:

(1) nonannuity distributions are made in accordance with the individual account rules of IRC Section 401(a)(9) (see Q 344); (4)

(2) the employee's benefit is payable in the form of a life annuity for the life of the employee that satisfies the requirements of IRC Section 401(a)(9) (see Q 345); (5) or

(3) the employee's sole beneficiary as of the annuity starting date is the employee's spouse, and the distributions otherwise satisfy IRC Section 401(a)(9). (But payments under the annuity must be nonincreasing, except for the exceptions explained at Q 345.) (6)

If distributions begin under a particular distribution option that is in the form of a joint and survivor annuity for the joint lives of the employee and a nonspouse beneficiary, the MDIB requirement will not be satisfied as of the date distributions begin unless the distribution option provides that annuity payments to be made to the employee on and after his required beginning date will satisfy the conditions set forth in regulations. (7) Under those provisions, the periodic annuity payment payable to the survivor must not at any time on and after the employee's required beginning date exceed the applicable percentage of the annuity payment payable to the employee using the RMD MDIB Joint and Survivor Annuity Table found in Appendix F. (8)

The applicable percentage is based on how much older the participant is than the beneficiary as of their attained ages on their birthdays in the first calendar year for which distributions to the participant are required. For example, if the beneficiary is 10 or fewer years younger, the survivor annuity may be 100%. If the age difference is greater than 10 years, the maximum survivor annuity permitted is less than 100%. If there is more than one beneficiary, the age of the youngest beneficiary is used. (9)

If a distribution form includes a life annuity and a period certain, the amount of the annuity payments payable to the beneficiary need not be reduced during the period certain, but in the case of a joint and survivor annuity with a period certain, the amount of the annuity payments payable to the beneficiary must satisfy the foregoing requirements after the expiration of the period certain. (10)

Period certain limitations. The period certain for annuity distributions commencing during the life of the employee with an annuity starting date on or after his required beginning date generally may not exceed the applicable distribution period for the employee for the calendar year that contains the annuity starting date. However, if the employee's spouse is his sole beneficiary, and the annuity provides only a period certain and no life annuity, the period certain may last as long as the joint and survivor life expectancy of the employee and spouse, if that period is longer than the applicable distribution period for the employee.1 If distributions commence after the death of the employee under the life expectancy rule explained in Q 346, the period certain for any distributions commencing after death cannot exceed the distribution period determined under the life expectancy provisions of Treas. Reg. [section] 1.401(a)(9)-5, A-5(b).

350. How is an individual taxed when a qualified plan distribution fails to meet the minimum distribution requirements?

An excise tax equal to 50% of the amount by which the required distribution exceeds the amount actually distributed is imposed on the recipient. (2)

The amount that must be distributed from a plan for a calendar year is the greater of (1) the amount that must be distributed for that year under the required minimum distribution (RMD) rules (see Q 342 to Q 348); or (2) the amount required to be distributed for that year under the minimum distribution incidental benefit (MDIB) rule (see Q 349).

The excise tax is imposed on the recipient of the distribution for his taxable year beginning with or within the calendar year for which the distribution is required. (3) For purposes of the excise tax, a distribution for a participant's first distribution year not required until April 1 of the following year (i.e., the required beginning date) is treated as required in the calendar year containing the participant's required beginning date. (4) See Q 343.

The excise tax may be waived if the Commissioner is satisfied that (1) the shortfall was due to reasonable error; and (2) reasonable steps are being taken to remedy it. (5) In addition, if an employee dies before his required beginning date, the excise tax will be automatically waived if: (1) the recipient is the sole beneficiary; (2) the RMD amount for a calendar year is determined under the life expectancy rule explained in Q 346; and (3) the entire distribution is completed by the end of the fifth calendar year following the calendar year of employee's date of death. (6)

Individual Accounts

If distributions are being made in a form other than an annuity (under a contract purchased from a life insurance company or directly from a defined benefit plan), the rules for individual accounts apply and the shortfall is determined by subtracting the actual amount of the distribution from the amount required under the RMD rules or the MDIB rule (whichever is greater). For this purpose, if there is more than one permissible method for determining a required distribution, the default method provided by the regulations is used unless the plan provides otherwise. For the permissible and default methods available under various circumstances, see Q 344 to Q 348. Of course, if distributions following the death of the participant are to be made under a method that complies with the 5-year rule (see Q 346), no amounts need be distributed, and thus there can be no excise tax, until the fifth calendar year following the death. In that year, the recipient's entire remaining balance is the minimum required distribution. (1) The five year period is expanded to six years if one of the five years is 2009.

Annuity Distributions.

For purposes of the following rules, determinations as to whether there is a designated beneficiary and which designated beneficiary's life expectancy is controlling are made under the rules explained in Q 347. (2)

If distributions are being made under an annuity contract purchased from a life insurance company, or under an annuity option of a defined benefit plan, and that annuity contract or option would meet the requirements of both the RMD rules and the MDIB rule, the shortfall is determined by subtracting the actual amount of distributions for the calendar year from the amount that should have been made for that calendar year under the provisions of the contract or option. (3)

If the annuity contract or option is an impermissible contract or option (i.e., one that fails to meet either the RMD rules or the MDIB rule), the shortfall is determined by subtracting the actual amount distributed for the calendar year from the minimum distribution determined under the following rules:

(1) In the case of a defined benefit plan, if distributions commence before the death of the participant, the minimum distribution is the amount that would have been distributed under the plan's joint and survivor annuity option for the lives of the participant and designated beneficiary, which (a) is permissible under both the RMD rules and the MDIB rule, and (b) provides the greatest level amount payable to the participant on an annual basis. If the plan does not provide such an option, or there is no designated beneficiary, the minimum distribution is the amount that would have been distributed under the plan's life annuity option payable in a level amount for the life of the participant with no survivor benefit. (4)

(2) In the case of a defined benefit plan, if distributions commence after the death of the participant and a designated beneficiary is named under the impermissible annuity option, the minimum distribution is the amount that would have been distributed under the plan's life annuity option payable in a level amount for the life of the beneficiary. If there is no designated beneficiary, no amount need be distributed until the fifth calendar year following the participant's death, at which time the entire interest must be distributed. (5)

(3) In the case of a defined contribution plan, if distributions commence before the death of the participant, the minimum distribution is the amount that would have been distributed from an annuity contract purchased under the plan's joint and survivor annuity option for the lives of the participant and designated beneficiary, which is both (a) permissible under the RMD rules and the MDIB rule, and (b) provides the greatest level amount payable to the participant on an annual basis. If there is no designated beneficiary, the minimum distribution is the amount that would have been distributed from a contract purchased under the plan's life annuity option providing level payments for the life of the participant with no survivor benefit. (6)

If the plan does not provide a permissible annuity distribution option, the minimum distribution is the amount that would have been distributed under a theoretical annuity contract purchased with the amount used to purchase the impermissible annuity. If there is a designated beneficiary, this theoretical contract is a joint and survivor annuity, which (a) provides level annual payments, (b) would be permissible under the RMD rules, and (c) provides the maximum survivor benefit permissible under the MDIB rule. If there is no designated beneficiary, the theoretical contract is a life annuity for the life of the participant, which provides level annual payments, and which is permissible under the RMD rules and the MDIB rule. (1)

(4) In the case of a defined contribution plan, if distributions commence after the death of the participant and a designated beneficiary is named under the impermissible annuity option, the minimum distribution is the amount that would have been distributed under a theoretical life annuity for the life of the designated beneficiary, which provides level annual payments, and which would be permissible under the RMD rules. If there is no designated beneficiary, no amount need be distributed until the fifth calendar year following the participant's death, at which time the entire interest must be distributed. (2)

The amount of the payments will be determined using the interest rate and mortality tables prescribed under IRC Section 7520, using the distribution commencement date determined under Treas. Reg. [section] 1.401(a)(9)-3, A-3 and using the age of the beneficiary as of his birthday in the calendar year that contains that date. (3)

State Insurer Delinquency Proceedings

There is no violation of the minimum distribution requirements (and thus no excise tax) if a shortfall occurs because assets are invested in a contract issued by an insurance company that is in the midst of state insurer delinquency proceedings. The RMD rules are not violated merely because payments were reduced or suspended by reason of state insurer delinquency proceedings against the life insurance company issuing the annuity. This amount and any additional amount accrued during this period will be treated as though it is not vested during such proceedings. Any distributions with respect to such amounts must be made under the relevant rules for nonvested benefits described in Treasury Regulations [subsection] 1.401(a)(9)-5, A-8 or 1.401(a)(9)-6, A-6. See Q 344, Q 345.

Alienation of Benefits

351. What restrictions apply to the assignment or alienation of a participant's qualified plan benefit?

The plan must provide that benefits under the plan generally may not be assigned or alienated or subject to garnishment or execution. (4) Limited exceptions are provided, including in the case of a qualified domestic relations order (QDRO, see Q 352), for collection of taxes or certain federal judgments, or when a participant has committed a breach of fiduciary duty to, or a criminal act against, the plan. (5) The U.S. Supreme Court has held that for purposes of the anti-alienation provision, a working business owner and the owner's spouse are ERISA-protected participants, provided the plan covers one or more employees other than the owner and spouse. (6)

Bankruptcy protection. Qualified plan interests generally are protected from the reach of plan participants' creditors in bankruptcy. (7) Even where it was unclear whether a plan was tax qualified, the reach of Patterson extended to an "ERISA employee pension benefit plan" and trust that contained an ERISA-enforceable restriction on transfers. (1) The U.S. Supreme Court has also extended the protection offered to qualified plan assets under the federal Bankruptcy Code to an IRA containing a rolled over lump sum distribution from a qualified plan. (2)

Payment of a participant's accrued benefit to a bankruptcy trustee pursuant to a bankruptcy court order, even with the participant's consent, is a prohibited alienation for qualification purposes. (3) But a plan administrator may, plan permitting, draw a loan check or a hardship withdrawal check payable to the participant but, pursuant to an agreement between the participant and bankruptcy trustee, send such checks directly to the bankruptcy trustee, to be endorsed over to the trustee by the participant, without violating the anti-alienation prohibition. (4)

A bankruptcy code requirement that debtors apply all "projected disposable income to be received ... to make payments under the [bankruptcy] plan" does not require a plan participant to take out a plan loan to pay toward his debt, because plan loans are not "income" for bankruptcy purposes. (5) But once a participant has already taken a plan loan and subsequently files bankruptcy, amounts used to repay the loan do not receive preferential treatment merely because the loans are secured by plan assets. In at least two rulings, the payments were not deemed necessary for the participant's "maintenance and support." (6)

QDRO exception. A plan may not distribute, segregate, or otherwise recognize the attachment of any portion of a participant's benefits in favor of the participant's spouse, former spouse, or dependents unless such action is mandated by a QDRO. (7) The basic requirements for a QDRO are explained at Q 352. The voluntary partition of a participant's vested account balance between his spouse and himself in a community property state is an alienation of benefits. (8) The Tax Court ruled that a participant's voluntary waiver of his benefits was a prohibited alienation, despite the PBGC's approval of the plan's termination; the waiver resulted in the plan being disqualified and the participant, who was the sole shareholder, being taxed on benefits he did not receive. (9)

Federal taxes and judgments. An anti-alienation provision will not prevent collection of federal taxes from the plan benefits. (10) But the IRS determined that a retirement plan was not obligated to honor an IRS levy on the benefits of a participant who was not yet entitled to receive a distribution; instead, the levy could be ignored until such time as the participant was eligible for a distribution. (11) The Service's ability to attach pension benefits ended with the participant's death, since benefits payable to his son as beneficiary did not constitute "property" to which a tax lien could attach. (12)

In some cases, the IRS has permitted the collection of criminal fines and restitution against plan assets. (13) The Service has privately ruled that for individuals already in "pay status," benefits may be subject to garnishment under the Federal Debt Collection Procedures Act whether the defendant is the plan participant or a beneficiary. The IRS noted that such collections could be made whether the recipient was a government entity or a private party; the government, in effect, "steps into the shoes of the taxpayer," receiving funds the taxpayer would have received and applying them toward a valid debt of the taxpayer. But such collections did not extend to individuals not yet in pay status, since they were not yet eligible for a distribution under the terms of the plan. (1)

Crime or fiduciary violation. Generally, a plan may offset a participant's benefit under a qualified plan to recover certain amounts that the participant is ordered or required to pay. (2) For this exception to apply, the order or requirement to pay must arise under a judgment of conviction for a crime involving the plan, under a civil judgment entered by a court in an action brought in connection with a violation of the fiduciary responsibility provisions of ERISA, or pursuant to a settlement agreement between the Department of Labor (or the Pension Benefit Guaranty Corporation) and the participant in connection with a fiduciary violation. The judgment, order, decree or settlement must specifically provide for the offset of all or part of the amount required to be paid to the plan.

If the plan is subject to the survivor annuity rules (see Q 338), the offset will be permitted if (i) the spouse has consented to the offset or signed a waiver of the survivor annuity rules; (ii) the spouse is ordered or required to pay an amount to the plan in connection with a fiduciary violation (e.g., the spouse is held responsible for the fiduciary violation); or (iii) the judgment, order, decree, or settlement provides that the spouse retains the right to the minimum survivor annuity. (3) Special rules are provided for determining the amount of the minimum survivor annuity. (4)

Other Exceptions

A plan may provide that after a benefit is in pay status, the participant or beneficiary receiving such benefit may make a voluntary and revocable assignment not to exceed 10% of any benefit payment, provided the assignment is not for the purpose of defraying plan administrative costs. (5)

Payment pursuant to a court order that is the result of a judicial determination that benefits cannot be paid to a beneficiary who murdered the plan participant is also permitted if the order conforms with the terms of the plan for directing payments when there is an fineligible beneficiary. (6)

A disclaimer of qualified plan benefits that satisfies the requirements of state law and IRC Section 2518(b) (qualified disclaimers, see Q 907) is not a prohibited assignment or alienation. (7)

An anti-alienation provision also will not prevent a plan from holding a rolled over distribution from another plan subject to an agreement to repay a part of the distribution in the event of early termination of the other plan. (8)

A loan from the plan (but not from a third party) made to a participant or beneficiary and secured by the participant's accrued nonforfeitable benefit is not treated as an assignment or alienation if the loan is exempt from the excise tax on prohibited transactions or would be exempt if the participant or beneficiary were a disqualified person. (9)

A participant or beneficiary may direct payment of his plan benefit payment to a third party (including the employer) if the arrangement is revocable and the third party files with the plan admin

Fistrator a written acknowledgement stating that he has no enforceable right to any plan benefit other than payments actually received. The written acknowledgement must be filed within 90 days after the arrangement is entered into. (1) After the death of a participant, an assignment made pursuant to a bona fide settlement between good faith adverse claimants to the participant's pension plan benefits was not invalidated by ERISA's anti-alienation provision. (2)

352. What is a "qualified domestic relations order"?

A "qualified domestic relations order" (QDRO) is a judgment, decree, or order (including an approval of a property settlement agreement) that meets all the requirements under the Code for being "qualified." A plan may distribute, segregate, or otherwise recognize the attachment of any portion of a participant's benefits in favor of the participant's spouse, former spouse, or dependents without violating the restrictions on alienation of benefits (see Q 351) only if such action is mandated by a QDRO. (3) (Only a spouse, former spouse, child, or other dependent of a participant may be an "alternate payee" under a QDRO.)

The following requirements must be met for a domestic relations order (DRO) to be qualified: (1) it must relate to the provision of child support, alimony, or property rights to a spouse, former spouse, child, or other dependent; (2) it must be made under a state's community property or other domestic relations law; (3) it must create, recognize, or assign to the spouse, former spouse, child, or other dependent of the participant (i.e., to an alternate payee) the right to receive all or a portion of a participant's plan benefits; and (4) it must clearly specify (a) the names and, unless the plan administrator has reason to know them, the addresses of the participant and each alternate payee, (b) the amount or percentage of the participant's benefit to be paid to each alternate payee (or a method for determining such amount), (c) the number of payments or the period to which such order applies, and (d) each plan to which such order applies. (4)

A distribution from a governmental plan, a church plan, or an eligible Section 457 governmental plan (see Q 125) will be treated as made pursuant to a QDRO as long as the domestic relations order meets requirements (1) through (3). (5) Model language for a QDRO is set forth in Notice 97-11. (6)

A marital settlement agreement that was incorporated into a divorcing couple's dissolution agreement constituted a QDRO, not merely a property settlement. (7) An amendment to a divorce decree did not constitute a QDRO, and thus could not confer on the ex-wife a 50% interest in the participant's preretirement survivor annuity, because prior to the amendment the participant had died and the benefits had lapsed. As a result, the amendment impermissibly provided for increased benefits. (8) In a private ruling, the IRS approved the use of a second QDRO to secure other marital obligations (in addition to a first QDRO ordering the segregation of a portion of the husband's retirement plan benefit for the wife's benefit). (9)

The majority position among the federal circuit courts seems to be that a QDRO is enforceable after a participant's death. (10) Congress has directed the Treasury Department to issue regulations under which a QDRO will not fail to be treated as valid merely because it revises, or is issued after, another QDRO. The regulations are also directed to provide that a QDRO will not be treated as invalid solely because of the time at which it is issued. (1)

The applicability of the QDRO provisions to benefits other than those provided by qualified plans is not fully clear. After having ruled in 1992 that they were inapplicable to nonqualified deferred compensation plans and welfare benefit plans (including life insurance), a Michigan district court reversed itself in 1996, holding that a QDRO provision should be followed with respect to the disposition of a welfare plan, such as life insurance. (2) The Court of Appeals for the Seventh Circuit has ruled that the QDRO provisions of ERISA were applicable to group term life insurance and other welfare plans.3 Final regulations governing Section 403(b) plans extend the application of the QDRO rules to tax-sheltered annuity contracts, at least with respect to taxable years beginning after 2005. (4)

A QDRO generally may not require that the plan provide any form of benefit not otherwise provided under the plan and may not require that the plan provide increased benefits (as determined actuarially). But within certain limits, it is permissible for a QDRO to require that payments to the alternate payee begin on or after the participant's earliest retirement age, even though the participant has not separated from service at that time. For these purposes, a participant's "earliest retirement age" is defined as the earlier of (1) the date that the participant is entitled to a distribution under the plan or (2) the later of (i) the date the participant attains age 50 or (ii) the earliest date on which the participant could begin receiving benefits under the plan if the participant separated from service. (5) A plan may provide for payment to an alternate payee prior to the earliest retirement age as defined in the Code. (6)

Planning Point: Employers should consider drafting their retirement plans to offer in-service distributions to alternate payees, so as not to be burdened with administering the benefits of employees' ex-spouses--a group that by its nature may be hostile to the employer. Martin Silfen, J.D., Brown Brothers Harriman Trust Co., LLC.

A domestic relations order requiring payment of benefits to an alternate payee is not qualified if the benefits are required to be paid to another alternate payee under a previous QDRO. The IRS has determined that the assignment of a participant's retirement account (or placement of a lien on it) to secure payment of obligations under the terms of a QDRO was not a prohibited alienation. (7)

The Code provides that, to the extent specified in a QDRO, the former spouse of a participant (and not the current spouse) may be treated as a surviving spouse for purposes of the survivor benefit requirements and, for that purpose, a former spouse will be treated as married to the participant for the requisite 1-year period if such former spouse and the participant had been married for at least one year (see Q 339). (8) In the absence of such a provision, a former spouse was not entitled to receive any benefits where the husband died before becoming entitled to receive retirement benefits and the preretirement survivor annuity was payable to the current spouse. (9)

The plan administrator is required to make the determination as to whether an order is a QDRO. All plans must establish reasonable procedures for making such determinations. (10) In addition, a plan administrator who has reason to believe an order is a sham or is questionable in nature must take reasonable steps to determine its credibility. (1) But the plan administrator is not required under the Code or ERISA to review the correctness of the determination that an individual is a surviving spouse under state domestic relations law. (2) Moreover, a plan administrator is not required to, and should not, "look beneath the face" of a state court order to determine whether amounts to which it relates were properly awarded. (3)

The DOL has stated that nothing in ERISA Section 206(d)(3) precludes a state court from altering or modifying an earlier QDRO of a couple petitioning the court for such a change, provided the new order satisfies the requirements of a QDRO. In such a case, the DOL noted that the new order would operate on a prospective basis only. (4)

A plan may provide for a "hold" to be placed on a participant's account while the determination is being made as to whether an order is a QDRO; but where a plan with such a provision went beyond its written procedures to place a hold on an account before the order was received (but after the divorce was final), the hold violated ERISA.5 The Department of Labor has also stated that plans are not permitted to impose separate fees for the costs of such procedures to individual participants or alternate payees. (6)

For the taxation of payments made pursuant to a QDRO, see Q 429 and Q 437. For an explanation of the effect of a QDRO on the minimum distribution requirements, see Q 348.

Top-Heavy Plan Requirements

353. What do the top-heavy rules require with respect to a qualified plan?

In any plan year in which the plan is a "top-heavy" plan (see Q 354), additional qualification requirements must be met. Plans established and maintained by the United States, by state governments and political subdivisions thereof, and by agencies and instrumentalities of any of these, are exempt from the top-heavy requirements. (7) See Q 355 for details.

Moreover, except to the extent provided in the regulations, all non-exempt plans (whether or not actually top-heavy) must contain provisions that meet the additional top-heavy qualification requirements and that will become effective should the plan become top-heavy. (8)

Plans established and maintained by the United States, by state governments and political subdivisions thereof, and by agencies and instrumentalities of any of these, are exempt from the top-heavy requirements. (9) Also, the top-heavy rules are not applicable to SIMPLE IRA plans (see Q 243), SIMPLE 401(k) plans (see Q 404), safe harbor 401(k) plans (see Q 403), or automatic enrollment safe harbor 401(k) plans (see Q 401). (10)

For the definition of a "top-heavy" plan, see Q 354. As to when a participant is a "key employee" for purposes of the top-heavy rules, see Q 360. For the additional qualification requirements applicable to top-heavy plans, see Q 355.

354. When is a plan top-heavy?

Single Plans

In the simplest case, where an employer maintains only one qualified plan, that plan is a top heavy plan with respect to a plan year if the present value of the cumulative accrued benefits under the plan (or the aggregate account balances if the plan is a defined contribution plan) for key employees (see Q 360) exceeds 60% of the present value of the cumulative accrued benefits under the plan (or the aggregate account balances) for all employees. (1)

For purposes of determining the present values of accrued benefits (or the sums of account balances), benefits derived from both employer contributions and nondeductible employee contributions are taken into account; benefits derived from deductible employee contributions are disregarded. (Deductible employee contributions are certain contributions made before 1987; the term does not refer to salary reductions or employee deferrals.) Any reasonable interest rate assumption may be used to calculate these present values; but the Service will automatically accept as reasonable a rate which is not less than 5%, nor greater than 6%. The interest rate used need not be the same as other assumptions used in the plan (e.g., the rate assumed for funding purposes). Where an aggregation group consists of two or more defined benefit plans, the interest rate assumptions used to calculate the present values must be the same in all plans. (2)

Present values and account balances are generally determined on the last day of the prior plan year; but when testing for top-heaviness with respect to the first plan year (as well as the second) of a new plan, the determination date is the last day of the first plan year. (3)

In the case of a defined contribution plan, the balance in each account on the determination date is calculated by adjusting the balance of each account as of the most recent valuation date occurring within 12 months prior to the determination date for contributions due as of the determination date. (4) For defined benefit plans, the present value of an accrued benefit as of the determination date is generally determined as of the most recent valuation date occurring in the previous 12 months. (Special rules apply in the case of a new defined benefit plan in its first and second plan years.) (5) The cumulative accrued benefit of non-key employees must be determined under the method used for accrual purposes for all plans of the employer or, if there is no such method, as if such benefit accrued not more rapidly than under the fractional method (see Q 373). (6)

In determining these present values and account balances, any distribution (generally including death benefits) made from the plan with respect to any employee during the one-year period ending on the determination date (and which is not already reflected in the present value or account balance) must be added back to the present value of that employee's accrued benefit or to his account balance, whichever is applicable. (7) In the case of a distribution made for a reason other than severance from employment, death, or disability, a five-year look-back period applies for this purpose. (8)

If an individual has not performed any services for the employer during the one-year period ending on the determination date, his accrued benefit and his account are not to be taken into account for purposes of determining whether the plan is top-heavy. (9) Also, if an individual was a key employee in a previous plan year but is currently a non-key employee for purposes of the top-heavy test, his cumulative accrued benefit (or account balance) is totally disregarded.

The terms "key employee" and "employee" should be read to include their "beneficiaries," so that the beneficiary of a key employee is treated as a key employee and the beneficiary of a former key employee is treated as a former key employee. (1) (For the definition of key employee, see Q 360.) This apparently means that for purposes of testing top-heaviness, an individual's accrued benefit or account balance must be considered in its entirety and not allocated between the individual and his beneficiaries. For plan years beginning before January 1, 2002, it also meant that the accrued benefit or account balance of a deceased key employee, even though payable (or paid) to his beneficiary, continued to be treated as that of a key employee for four years. (2)

A plan will not be treated as violating the top-heavy rules 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. (3) See Q 400 for details on the requirements for catch-up contributions. For the effect of roll-over contributions on the top-heavy calculation, see "Rollovers," below.

Multiple Plans

Generally, where an employer maintains more than one qualified plan, some or all of those plans will be aggregated and tested as a group for top-heaviness. Specifically, (1) all qualified plans (including collectively-bargained plans) of an employer which cover at least one key employee (i.e., key employee plans) and (2) any qualified plans which enable an otherwise discriminatory key employee plan to satisfy the nondiscrimination requirements of IRC Sections 401(a)(4) or 410 (see Q 327 to Q 333, Q 411 to Q 403) are required to be aggregated into a single group.

In addition, the employer may designate any other qualified plan or plans (including collectively bargained plans) not required to be aggregated under (1) or (2) to be included in an existing aggregation group, provided that the resulting group, taken as a whole, would continue to satisfy IRC Sections 401(a)(4) and 410.

If an aggregation group is top-heavy, all plans required to be included in the group under (1) or (2) will be considered top-heavy plans; any plan included in the group solely because of the employer's designation will not be treated as top-heavy. (Even though a collectively-bargained plan covering a key employee might be part of a top-heavy aggregation group because it was required to be aggregated, that collectively-bargained plan will be excepted from the fast vesting, minimum benefits, and maximum compensation requirements discussed in Q 355.) (4) If the aggregation group is not top-heavy, no plan in the group will be considered top-heavy, even though one or more plans composing the group would be top-heavy if tested alone. (5)

The procedure for testing top-heaviness of an aggregation group is the same as that discussed above for a single plan, except that the values tested are the sums of the respective present values and account balances determined for each plan (as of its determination date) composing the group. When plans composing the aggregation group have different plan years, the test is carried out using the determination dates which fall within the same calendar year. (6)

If only one of the employer's plans is a key employee plan and that plan, by itself, satisfies the nondiscrimination requirements of IRC Sections 401(a)(4) and 410, that plan will be tested as a "single" plan unless the employer elects to designate another plan for aggregation with the key employee plan.

Simplified Employee Pension Plans

For purposes of testing for top-heaviness, a simplified employee pension plan, including a SARSEP (see Q 242), is treated as a defined contribution plan. An employer may elect to use aggregate employer contributions to the simplified employee pension plan, rather than aggregate account balances, for purposes of the top-heavy test. (1)

Rollovers

How amounts rolled over (or otherwise transferred) to or from a qualified plan are treated for purposes of determining whether the plan is top-heavy depends on the surrounding circumstances. If the rollover or transfer is initiated other than by the employee (as in the case of a merger or division of plans) or is made between plans of the same employer (or related employers required to be aggregated under IRC Section 414), the amount rolled over is counted as part of the employee's accrued benefits by the receiving plan, but disregarded by the distributing plan. If the rollover or transfer is initiated by the employee (regardless of who initiated the distribution) and is made between plans of unrelated employers, the rollover distribution generally must be added back to the distributing plan for a one-year period and generally disregarded by the receiving plan. (2)

Simplified Calculation Methods

Precise top-heavy ratios need not be computed every year so long as the plan administrator knows whether or not the plan is top-heavy. For this purpose, and for the purpose of demonstrating to IRS that a plan is not top-heavy, an employer may use computations that are not precisely in accordance with the top-heavy rules but which mathematically prove that the plan is not top-heavy. (Several such methods are provided in the regulations.) (3)

355. What are the special qualification requirements that apply to top-heavy plans?

In addition to the qualification requirements that apply to qualified plans generally (see Q 325), special requirements are imposed by the Code on top-heavy plans. Also, top-heavy simplified employee pension plans are required to meet certain minimum contribution requirements. In applying these requirements the common control, controlled group, and affiliated service group aggregation rules apply. See Q 362, Q 363. Also, under some circumstances, "leased" employees may be imputed to the employer (see Q 358). (4)

The following requirements must be met by top-heavy plans in general (top-heavy simplified employee pensions need meet only the minimum contribution requirements discussed in Q 355B, below):

Fast Vesting

A. A top-heavy plan must provide that an employee has a nonforfeitable right to his accrued benefit derived from employer contributions in accordance with one of the two following requirements:

1. Three-year vesting. An employee who has completed at least three years of service with the employer must have a nonforfeitable right to 100% of his accrued benefit. (1)

2. Six-year graded 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: 20% after two years of service, 20% additional for each of the following years of service, reaching 100% after six years of service with the employer. (2)

Except to the extent that they are inconsistent with these fast vesting schedules, the rules that pertain to vesting in qualified plans generally (including years of service and breaks in service, etc.) apply for purposes of the fast vesting requirements.3Thus, the fast vesting schedules are not safe harbors; even faster vesting may be required by IRC Section 411(d) where there is a pattern of abuse. See Q 336.

When a plan becomes top-heavy, fast vesting under one of the two schedules must generally be applied to all benefits accrued under the plan for the current plan year and all prior plan years (including benefits accrued in years before the plan became top-heavy and benefits accrued before the effective date of the top-heavy rules). But the accrued benefit of any employee who does not have an hour of service after the plan became top-heavy, and any accrued benefits that were forfeited before the plan became top-heavy, need not be covered by the fast vesting schedule. (4)

Although the Code does not require that fast vesting be applied to benefits accrued in future plan years in which the plan is not top-heavy, a return to the plan's slower vesting when the plan ceases to be top-heavy may, in many cases, be impractical or impossible. For example, IRC Section 411(a)(10) requires that a change in vesting schedules not reduce a participant's nonforfeitable percentage in his accrued benefit and that certain participants be allowed to elect to be covered by the previous vesting schedule. See Q 336. (5)

Minimum Benefits and Contributions

B. For any top-heavy plan year, a plan generally must provide a minimum benefit or contribution for each non-key employee who is a participant. (6) Integration (i.e., permitted disparity) must be disregarded for purposes of determining a minimum benefit or contribution (see Q 355C, below).

Defined benefit plans. A top-heavy defined benefit plan generally must provide an accrued benefit (derived from employer contributions) for each non-key employee participant which when expressed as an annual retirement benefit is not less than the participant's average compensation multiplied by the lesser of 2% for each year of service with the employer or 20%. (7)

Years of service are the same as the "years of service" taken into account for the ordinary vesting rules (see Q 336), but years of service in which non-top-heavy plan years end are not counted for this purpose, nor are years in which no key employee (or former key employee) benefits under the plan. (8)

Average compensation is a participant's average annual compensation for the period of consecutive years (not exceeding five) during which the participant had the greatest aggregate compensation from the employer. (1) But compensation for any year which is not a "year of service" is disregarded. (2) Similarly, unless the plan provides otherwise, compensation for any year beginning after the plan has ceased forever to be top-heavy, is not counted. (3) For the definition of compensation, see Q 334. Annual retirement benefit means a benefit payable annually in the form of a single life annuity (with no ancillary benefits) beginning at the normal retirement age under the plan. (4)

For the application of the minimum benefit requirement to a defined benefit plan funded exclusively by level premium insurance contracts, see Treasury Regulation [section] 1.416-1, M-17.

Defined contribution plans. For each plan year in which a defined contribution plan or simplified employee pension plan is top-heavy, employer contributions and forfeitures allocated to the account of each non-key employee participant must not be less than the amount which is calculated by multiplying the participant's compensation by the lesser of (a) 3%, or (b) that percentage which is the highest contribution rate made for a key employee. (5)

For purposes of determining the highest contribution rate received by a key employee, employer contributions and forfeitures made on behalf of each key employee under the plan (or if the plan is part of a required aggregation group (see Q 354), all defined contribution plans included in the group) are divided by his total compensation for the year (but not more than $245,000, as indexed for 2010; see Appendix E for earlier years). (6)

Although employer contributions attributable to salary reduction or similar arrangements may not be disregarded when calculating the minimum contribution requirement for a top-heavy defined contribution plan, such contributions may not be used to satisfy that top-heavy minimum contribution requirement. (7) Nonelective contributions and employer matching contributions may be used to satisfy the minimum contribution requirement, but such amounts generally cannot then be used in the ACP or ADP test (see Q 412, Q 411). (8) For application of the minimum contribution requirement in the case of a plan which has received a waiver of the minimum funding requirements, see Treas. Reg. [section] 1.416-1, M-9.

If a top-heavy defined contribution plan required to be included in an aggregation group (see Q 354) with a discriminatory defined benefit plan enables that defined benefit plan to satisfy the nondiscrimination requirements of IRC Sections 401(a)(4) and 410, the minimum contribution is 3% of the participant's compensation (and the "highest contribution rate for key employees" is disregarded). (9)

Defined benefit and defined contribution plans. Although an employer who maintains both a top-heavy defined benefit plan and a top-heavy defined contribution plan is not required by the top-heavy rules to provide a non-key employee who participates in both plans with a minimum contribution and a minimum benefit, the non-key employee may not receive less under the combined plans than he would if he participated in only one of the plans.10 The regulations provide four safe harbor rules which a plan may use to determine which minimum an employee must receive. (11)

Collective bargaining units. The minimum contribution and minimum benefit requirements do not apply in the case of any employee covered by a collective bargaining agreement if there is evidence that retirement benefits were the subject of good faith bargaining. (1)

Integration

C. Although the Code does not prohibit integration in a top-heavy plan, the fast vesting and minimum benefit (and contribution) requirements discussed in Q 355A and Q 355B, above, must be satisfied without taking into account employer payments of FICA taxes or contributions or benefits made or received under any other federal or state law. (2)

Miscellaneous Qualification Rules

356. What other qualification requirements must be met in order for a plan to be qualified?

A. A qualified plan must be a permanent, as distinguished from a temporary, program. Thus, although an employer may reserve the right to amend or terminate the plan, the abandonment of the plan for any reason other than business necessity within a few years after its establishment will be evidence that the plan from its inception was not a bona ide program for the exclusive benefit of employees in general. This will especially be true if, for example, a pension plan is abandoned soon after pensions have been funded for the highly-paid or stockholder employees. (3)

B. The plan must provide that in the case of any merger or consolidation with, or transfer of assets or liabilities to, any other plan, each participant in the plan would (if the plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the plan had then terminated). (4) (This requirement does not apply to certain multiemployer plans.) Shifting assets between funding media used for a single plan (e.g., between trusts and annuity contracts) is not a transfer of assets or liabilities. (5)

C. Early retirement benefit. If a plan provides for payment of an early retirement benefit, a vested participant who terminates his employment after having satisfied the service requirements, but not the age requirement for the early benefit, must be entitled, upon satisfaction of the age requirement, to receive a benefit not less than the benefit to which he would be entitled at normal retirement age, actuarially reduced in accordance with reasonable actuarial assumptions. (6) In the case of a defined contribution plan, the employee, upon reaching early retirement age following termination after having satisfied service requirements, must be entitled to receive a benefit equal in value to the vested portion of his account balance at early retirement age. (7)

D. Social Security offset. The plan must not permit benefits to be reduced by reason of any increase in Social Security benefit levels or wage base occurring (1) after separation from service, in the case of a participant who has separated from service with nonforfeitable rights to benefits, or (if earlier) (2) after first receipt of benefits, in the case of a participant or beneficiary who is receiving benefits under the plan. (8) This requirement also applies to plans that supplement benefits provided under state or federal laws other than the Social Security Act, such as the Railroad Retirement Act of 1937. (1)

E. Withdrawal of employee contributions. The plan must preclude forfeitures of accrued benefits derived from employer contributions (whether forfeitable or nonforfeitable) solely because a benefit derived from the participant's contributions is voluntarily withdrawn by him after he has a nonforfeitable right to 50% of his accrued benefit derived from employer contributions. (2)

F. Compensation. Generally, a plan will not be qualified unless (for the purpose of any of the qualification rules) not more than $245,000 (as indexed for 2010) of annual compensation of any employee is taken into account under the plan for any plan year. (3) (See Appendix E for the amounts for earlier plan years.) This amount is indexed for inflation in increments of $5,000. (4)

Employees and Employers

357. What individuals are treated as "employees" of an employer for purposes of meeting the qualification requirements?

Generally, the term "employee" includes any individual who performs services for a person or entity that 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. (5) These individuals are referred to as "common law employees." The Supreme Court has set forth a 20-factor test for determining whether an individual is a common law employee. (6) Self-employed individuals (including sole proprietors and partners operating trades, businesses, or professions), although clearly not "common law employees," are treated as employees for purposes of participating in qualified plans (see Q 361). (7)

To prevent abuses of the tax advantages of qualified retirement plans through the manipulation of separate employer entities, the Code provides several special rules that must generally be applied when testing plan qualification, as follows:

... All employees of all corporations that are members of a "controlled group" of corporations and all employees of trades or businesses under "common control" must be treated as employed by a single employer. (8) See Q 362.

... All employees of the members of an "affiliated service group" must be treated as employed by a single employer. (9) See Q 363.

... "Leased employees" must be treated as employees. (10) See Q 358 for an explanation of the special rules that apply to leased employees.

The aggregation rules for controlled groups and trades and businesses under common control also appear in ERISA; the aggregation rules for affiliated service groups do not. Except in the case of employees of an affiliated service group or certain leased employees, employees of a partnership need not be treated as employees of any partner who does not own more than a 50% interest in the capital or profits of the partnership. (1)

358. What special rules apply to "leased employees" for purposes of the qualification requirements?

Generally, for purposes of most of the qualification requirements, an employer treats any individual who is a "leased employee" as though that individual were the employer's own employee; however, to the extent that contributions or benefits provided for the leased employee by the organization from which he is "leased" are attributable to services performed for the employer, such contributions or benefits are treated as if they were provided by the employer under a qualified plan. (2)

A leased employee is an individual who is not an "employee" of the recipient employer and who performs services for a recipient employer, if (1) his services are provided to the recipient under one or more agreements with a leasing organization, (2) he has performed his services for the recipient (or related employer) on a substantially full-time basis for a period of at least one year, and (3) the services are performed under primary direction or control by the recipient.3 For purposes of this definition, the term "employee" means a "common law employee," as determined under the 20-factor test set forth in Nationwide Mutual Ins. Co. v. Darden, (4) and that test must be applied before it can be determined whether an individual meets the definition of a "leased employee." (5)

But the fact that an individual is a leased employee does not automatically mean he must be a participant in a plan maintained by the employer. At least two circuit courts have held that ERISA does not per se require the inclusion of leased employees in an employer's plan. (6) In addition, the IRS addressed this issue in Notice 84-11, (7) stating that IRC Section 414(n)(1)(A) requires only that leased employees be treated as employees, not that they be participants in the plan. Despite its issuance prior to TRA '86, Notice 84-11 was cited favorably in Bronk v. Mountain States Tel. & Tel., Inc. (8) as controlling authority on this issue.

The determination of whether services are performed under the primary direction or control of the recipient is made on the basis of the facts and circumstances. Generally, such a finding will be made if the service recipient exercises the majority of direction and control over the individual: for example, whether the individual is required to comply with the recipient's instructions as to (a) when, where, and how the services are to be performed; (b) whether the services will be performed by a particular person; (c) whether the individual is subject to the recipient's supervision; and (d) whether the services must be performed in a particular order or sequence set by the recipient. For examples showing the application of the amended provision, see the 1996 Blue Book at pages 173-174.

The recipient may be a single employer or a group consisting of employers required to be aggregated under the controlled group, common control, or affiliated service group rules (see Q 362, Q 363). (9) Employers are "related" if (1) a loss on a sale of property between them would be disallowed as a deduction under IRC Sections 267 or 707(b) or (2) they are members of the same controlled group of corporations (using a 50% rather than 80% ownership test). (1)

Even though an individual is a "leased employee" he may be disregarded by the employer for purposes of determining qualification if the individual is covered by a qualified money purchase pension plan maintained by the leasing organization and

(1) the plan provides for employer contributions by the leasing organization at a nonintegrated rate which is not less than 10%;

(2) the plan provides for immediate participation on the first day an individual becomes an employee of the leasing organization (unless (i) the individual's compensation from the leasing organization in each plan year during the four-year period ending with the plan year is less than $1,000, or (ii) the individual performs substantially all of his services for the leasing organization);

(3) the plan provides for full and immediate vesting of all contributions under the plan; and

(4) leased employees do not constitute more than 20% of the recipient's nonhighly compensated work force. (2)

(This "safe harbor" applies only for purposes of the leased employee provision; it does not permit an employer to disregard a common law employee who otherwise meets the definition of a leased employee. (3))

The recipient's nonhighly compensated workforce is the aggregate number of individuals (who are not highly compensated--see Q 359) (1) who are common law employees of the recipient and have performed services for the recipient on a substantially full-time period of at least one year or (2) who are leased employees with respect to the recipient. (4)

A money purchase pension plan of a leasing organization is not qualified if it covers any individuals who are leased by the leasing organization to the recipient but who are not themselves employees (or, it would seem, leased employees) of the leasing organization; such a plan does not meet the "exclusive benefit" rule (see Q 326).5

359. Who are the "highly compensated" employees for purposes of the qualification requirements?

Generally, a highly compensated employee is any employee who is either a highly compensated active employee or a highly compensated former employee. (6) Under some circumstances, but highly compensated active employees are considered separately from highly compensated former employees.

Status as a highly compensated active employee is determined by focusing on the determination year (i.e., the plan year for which the determination is being made) and the immediately preceding 12-month period (the "look-back" year).

An employee is a highly compensated active employee with respect to a plan year (i.e., the determination year) if he (1) was a 5% owner (as defined for top-heavy purposes--see Q 360) at any time during either the determination year or look-back year or (2) received compensation for the preceding year in excess of $110,000 (in 2010, as indexed) from the employer, and if the employer elects the application of this clause for the preceding year, was in the "top-paid group" (see below) for that year. (1) The income threshold ($80,000 as it appears in the Code) is indexed at the same time and in the same manner as the Section 415 defined benefit dollar limitation; see Appendix E for the amounts for earlier years. (2)

The applicable dollar amount for a particular determination or look-back year is the dollar amount for the calendar year in which the determination year or look-back year begins. (3)

Employers may identify which employees are highly compensated employees under IRC Section 414(q) using the same "snapshot" testing that is used for the nondiscrimination requirements (i.e., use test results for a single day during the plan year, provided that day is representative of the employer's workforce and the plan's coverage throughout the plan year). (4)

The IRS has stated that a fiscal year plan may make a calendar year data election. If the election is made, the calendar year beginning with or within the look-back year will be treated as the employer's look-back year for purposes of determining whether an individual is a highly compensated employee on account of his compensation (this election will not apply in determining whether a 5% owner is highly compensated). The effect of this election is that even though an employer maintains a plan on a fiscal year basis, it uses calendar year data. Once made, such an election applies for all subsequent years unless changed by the employer. (5)

The "top-paid group" of employees for a year is the group of employees in the top 20%, ranked on the basis of compensation paid for the year. (6) Once made, a top-paid group election remains in effect until it is changed by the employer. (7) Former employees are not included in the top-paid group. Also, employees who are excluded in determining the number of the top-paid group by reason of the collective bargaining agreement exclusion (see below) are also excluded for purposes of identifying the members of the top-paid group. (8)

No special notification or filing of a top-paid group election or a calendar year data election is required; but certain plan amendments may be necessary to incorporate a definition of highly compensated employees that reflects the election. (9) Furthermore, a consistency requirement states generally that an election made by an employer operating more than one plan must apply consistently to all plans of the employer that begin with or within the same calendar year. (10)

Nonresident aliens who receive no earned income from sources within the United States are disregarded for all purposes in determining the identity of the highly compensated employees. (11) An employer may adopt any rounding or tie-breaking methods which are reasonable, nondiscriminatory, and uniformly and consistently applied. (12) An employee who is highly compensated as a result of meeting two or more of the tests above is not disregarded for the purpose of applying any of those tests to other individuals. (13)

No employee of a church plan (as defined in IRC Section 414(e)) is considered an officer, a person whose principal duties consist of supervising the work of other employees, or a highly compensated employee for any year unless such an employee meets the definition of highly compensated employee. (1)

"Compensation" is the compensation received by the participant from the employer for the year, including elective or salary reduction contributions to a cafeteria plan, cash or deferred arrangement or a tax sheltered annuity. (2)

In determining the number of employees in the top-paid group (but not for the purpose of identifying the particular employees in the group), the following employees may be excluded:3 (1) employees with less than six months of service, including any service in the immediately preceding year; (2) generally, employees who normally work less than 17/ hours per week (if certain requirements are met (4)); (3) employees who normally work during not more than six months in any year, determined on the basis of the facts and circumstances as evidenced by the employer's customary experience in the years preceding the determination year;5 (4) employees under the age of 21; and (5) employees covered by a collective bargaining agreement if 90% or more of the employees of the employer are covered under the agreement and the plan being tested covers only employees who are not covered under the agreement. (6)

Except as provided by future IRS pronouncements, an employer may elect to use a shorter period of service, smaller number of hours or months, or lower age than those specified above (including a zero age or service requirement exclusion). (7) Also, the employer may elect not to exclude members under the collective bargaining exclusion. (8)

A highly compensated former employee for a determination year is any employee who had a separation year prior to the determination year and was a highly compensated active employee for either his separation year or any determination year ending on or after his 55th birthday. (9)

A separation year is any year during which the employee separates from service with the employer. For purposes of this rule, an employee who performs no services for the employer during a determination year is treated as having separated from service with the employer in the year that he last performed services for the employer. An employee will be deemed to have a separation year if, in a determination year prior to attainment of age 55, he receives compensation in an amount less than 50% of his average annual compensation for the three consecutive calendar years preceding the determination year in which he received the greatest amount of compensation from the employer (or the total period of his service with the employer, if less). Because an employee who is deemed to have a separation is still performing services for the employer during the determination year, he is treated as an active employee and the deemed separation year is relevant only for purposes of determining whether he will be a highly compensated former employee after he actually separates from service. But an employee with a deemed separation year will not be treated as a highly compensated former employee (by reason of such deemed separation year) if he later has a significant increase in services and compensation and, thus, is deemed to have a resumption of employment. (10)

The controlled group, common control, and affiliated service group aggregation rules, as well as the employee leasing provisions, are applied before applying the highly compensated employee rules. (1) See Q 362, Q 363, and Q 358. But the entity aggregation rules are not taken into account for purposes of determining who is a 5% owner. Also, the separate lines of business rules are not applicable in determining the highly compensated group. (2)

360. Who is a key employee for purposes of the top-heavy rules for qualified plans?

Generally, a key employee, for purposes of the top-heavy rules, is any employee (or, in some cases, a former or deceased employee) who at any time during the plan year containing the determination date for the plan year to be tested is

(1) an officer (see below) of the employer whose annual compensation from the employer exceeds $160,000 (as indexed for 2010--this amount is indexed for inflation in increments of $5,000);

(2) a more-than-5% owner (see below) of the employer, or

(3) a more-than-1% owner of the employer having annual compensation from the employer for a plan year in excess of $150,000 (not indexed).3 (As to when the determination date occurs, see Q 354.)

The determination as to whether an individual is an officer is made on the basis of all facts and circumstances; job titles are disregarded. An officer is an administrative executive who is in regular and continuous service, not a nominal officer whose administrative duties are limited to special and single transactions. (4) Unincorporated associations (e.g., partnerships, sole proprietorships, etc.) may have officers. (5)

In any case, the number of individuals treated as key employees because of their "officer" status is limited to the greater of three (individuals) or 10% of all employees, but in any event, not more than 50. (6)

Those employees who can be excluded when determining the number of employees in the "top-paid group" for purposes of identifying an employer's "highly compensated" employees (see Q 359) can also be disregarded in determining the number of officers to be taken into account in identifying "key employees." (7) It is unclear how ties in compensation should be resolved. Whether an individual is a key employee because of his "officer" status is determined without regard to whether he is a key employee for any other reason. (8)

An individual owns more than 5% of a corporate employer if he owns more than 5% of the outstanding stock of the corporation (by value) or stock possessing more than 5% of the total combined voting power of all stock of the corporation. In determining stock ownership, the attribution rules of IRC Section 318 apply (but stock is attributed from a corporation if a 5% rather than 50% ownership test is met). Only ownership in the particular employer is considered; the controlled group, common control, and affiliated service group aggregation rules of IRC Section 414 are disregarded. An individual owns more than 5% of a noncorporate employer if he owns more than 5% of the capital or profits interest in that employer. Rules similar to the attribution rules of IRC Section 318 apply for purposes of determining ownership in a noncorporate employer. The aggregation rules of IRC Section 414 are disregarded. (1)

The rules discussed in the previous paragraph also apply to determine whether an individual is a "more-than-1%" owner of the employer. (2) But all employers who are under common control or who are members of a controlled or affiliated service group (see Q 362, Q 363) are treated as one employer for the purpose of determining whether a more-than-1% owner has annual compensation from the employer in excess of $160,000.

"Compensation," for purposes of identifying key employees generally, is the compensation taken into account for purposes of the IRC Section 415 limitations on contributions and benefits. Any elective or salary reductions contributions made on behalf of the employee to a 401(k) cash or deferred plan, simplified employee pension, 403(b) tax sheltered annuity, or cafeteria plan are included as compensation for purposes of IRC Section 415. (3)

For purposes of determining an employee's ownership in the employer, the attribution rules of IRC Section 318 (presumably using a 5% rather than 50% test to determine whether there is attribution from a corporation) and the aggregation rules of IRC Section 414 apply. (40 If two employees have the same ownership interest in the employer, the employee who has the greater annual compensation from that employer will be treated as owning the larger interest. (5)

Beneficiaries. The terms "employee" and "key employee" include their respective beneficiaries. (6)

Governmental plans. The term "key employee" is applied under various provisions of the Internal Revenue Code (e.g., IRC Sections 401(h), 415(l), and 419A). For these purposes, the term does not include any officer or employee covered by a governmental plan.7 Thus, the separate accounting and nondiscrimination rules under those provisions do not apply to employees covered by governmental plans.

361. Who is an owner-employee for purposes of the qualification requirements?

An owner-employee is an employee (as defined at Q 425) who (a) owns the entire interest in an unincorporated trade or business or, (b) in the case of a partnership, owns more than 10% of either the capital interest or the profits interest in the partnership. (8) Even if a partnership agreement does not specify a more than 10% interest in profits for any partner, if the formula for dividing profits (e.g., based on a partner's earnings productivity during the year) in operation actually produced at the end of the year a distribution of more than 10% of profits to a partner, the Tax Court has ruled he is an owner-employee for the year. (9)

An individual who owns the entire interest in an unincorporated trade or business is treated as his own employer. (10) Thus, a proprietor or sole practitioner who has earned income (as defined in Q 425) can establish a qualified plan under which he is both employer and his own employee.

A partnership is treated as the employer of each partner who is an employee (as defined in Q 425). (1) Thus, partners individually cannot establish a qualified plan for the firm, but the partnership can establish a plan in which the partners can participate.

Persons who are shareholder-employees in professional corporations or associations or in business corporations (including S corporations) are not self-employed individuals. Such persons participate in a qualified plan of the corporation as regular employees of the corporation. (2) This is true even of a shareholder-employee who is sole owner of the corporation. S corporation pass-through income may not be treated as self-employment earnings for purposes of a Keogh plan deduction, even where the shareholder performed services for the corporation. (3)

A "common law employee" (or "regular" employee) is one who is an employee under common law rules, as distinguished from a self-employed individual who is considered an employee only for qualified plan purposes. Generally speaking, an individual is considered 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. (4)

The common law rules also apply generally in determining whether an individual is an "employee" for Social Security purposes. Ordinarily, therefore, an individual who is an "employee" under Social Security is a "common law employee" for self-employed plan purposes. But a person's status for self-employed plan purposes is determined by the definition of "employee" under the Social Security law, irrespective of whether or how his earnings are covered under Social Security. Thus, if a person is an employee under the common law rules, it is immaterial that his earnings are treated as self-employment income under the Social Security law. For example, a minister or other clergy who is employed by a congregation on a salaried basis is a common law employee, and not a self-employed individual, even though for Social Security purposes his compensation is treated as net earnings from self-employment. But amounts received by him directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services, represent earnings from self-employment.

Furthermore, full-time life insurance salespersons are treated as common law employees for both Social Security and qualified retirement plan purposes even though, under the common law rules, they are self-employed. This is because of special statutory provisions in the Social Security Act and the Internal Revenue Code. Thus, a "full-time life insurance salesman" (as defined in the Social Security law) is prohibited from establishing a qualified plan for himself. (5) But it would appear that general agents and most general lines insurance agents and brokers are considered self-employed individuals and are eligible to establish qualified plans for themselves and their employees.

Attorneys with a law firm, depending on the circumstances, can either be self-employed or have the status of an "employee" of the firm. (6)

An individual may participate in a qualified plan as a self-employed person even though he performs work as a common law employee for another employer. For example, an attorney who is a common law employee of a corporation and who in the evenings maintains an office in which he practices law is eligible to establish a plan as a self-employed person with respect to his law practice. An individual may be self-employed with respect to some services he sells to a business even though he also provides other services to the same business as an employee. In either case, he may participate in a qualified plan as a self-employed person with respect to his self-employed earnings, even though his employer maintains a qualified plan under which he is covered as a common law employee. (1) A tenured university professor who conducted seminars in a separate capacity at the university with which he was employed was determined by the Tax Court to be self-employed, despite objections by the IRS. As a result, he was permitted to establish a Keogh plan with amounts earned from his self-employment. (2)

Where a partnership's profit sharing plan that did not cover self-employeds permitted limited partners who were also employees of the partnership (and compensated as such in addition to their share of the partnership's profits) to participate, the IRS ruled that the plan failed to qualify.3

362. What is a "controlled group" of corporations? When are trades or businesses under "common control"?

Generally, all employees of a group of employers that are members of a controlled group of corporations, or (in the case of partnerships and proprietorships) are under common control will be treated as employed by a single employer, for purposes of the qualification, vesting and top-heavy rules, as well as the Section 415 limits and the requirements for SEPs. (4)

Controlled Groups

A controlled group may be a parent-subsidiary controlled group, a brother-sister controlled group, or a combined group. (5)

A parent-subsidiary controlled group is composed of one or more chains of subsidiary corporations connected through stock ownership with a common parent corporation. A parent-subsidiary group exists if at least 80% of the stock (by value or voting power) of each subsidiary corporation is owned by one or more of the other corporations in the group (either subsidiaries or parent) and the parent corporation owns at least 80% of the stock (by value or voting power) of at least one of the subsidiary corporations. When determining whether the parent owns 80% of the stock of a subsidiary corporation, all stock of that corporation owned directly by other subsidiaries is disregarded.

A brother-sister controlled group consists of two or more corporations in which five or fewer persons (individuals, estates, or trusts) own stock possessing (a) 80% or more (by value or voting power) of each corporation and (b) more than 50% (by value or voting power) of each corporation when taking into account each stockholder's interest only to the extent he has identical interests in each corporation. (For purposes of the 80% test, a stockholder's interest is considered only if he owns some interest in each corporation of the group. (6))

A combined group consists of three or more corporations, each of which is a member of a parent subsidiary group or a brother-sister group and one of which is both a parent of a parent-subsidiary group and a member of a brother-sister group. (7)

Special rules for determining stock ownership, including special constructive ownership rules, apply when determining the existence of a controlled group. (8) Community property rules, where present, also apply. (1) For purposes of qualification, the test for a controlled group is strictly mechanical; once the existence of the group is established, aggregation of employees is required and will not be negated by showing that the controlled group and plans were not created or manipulated for the purpose of avoiding the qualification requirements. (2)

Trades or Businesses Under Common Control

Under the regulations, trades or businesses are under common control if they constitute a parent-subsidiary group of trades or businesses, a brother-sister group of trades or businesses, or a combined group of trades or businesses. The existence of these groups is determined under rules similar to those discussed above for controlled groups of corporations. "Trades or businesses" include sole proprietorships, partnerships, estates, trusts, and corporations. (3)

363. What is an "affiliated service group"?

For purposes of certain qualification requirements, as well as the vesting requirements, top-heavy rules, Section 415 limits and the requirements for SEPs, all employees of the members of an affiliated service group are generally treated as employed by a single employer. (4)

An "affiliated service group" is a group consisting of a service organization (referred to as "FSO" for "first service organization") and either or both of

(1) an additional service organization (referred to as an "A" organization) that is a shareholder or partner in the FSO and regularly performs services for the FSO or is regularly associated with the FSO in the performance of services for third parties or

(2) an organization (referred to as a "B" organization) if a significant portion of the organization's business is the performance of services for the FSO or A organization (or both) and the services are of a type historically performed by employees in the service field of the FSO or A organization; and

(3) 10% or more (in the aggregate) of the interests in the B organization is held by highly compensated employees of the FSO or A organization or certain common owners. (5)

The term "affiliated service group" also includes a group consisting of (1) an organization the principal business of which is performing on a regular and continuing basis, management functions for another organization, and (2) the organization for which the functions are performed. (6)

An organization is a service organization if its principal business is the performance of services in one of the fields enumerated in the regulations (e.g., health, law, etc.) or if capital is not a material income-producing factor for the organization. (7)

The performance of services for a first service organization or for an A organization (or both) will be assumed to constitute a significant portion of a B organization's business if 10% or more of its total gross receipts from all sources during the current year, or two preceding years, was derived from performing services for such organization(s). It will be assumed that the performance of services for such organization(s) is not a significant portion of a B organization's business if less than 5% of its gross receipts derived from performing services during the current year and two preceding years was derived from performing services for such organizations. (1) Services are of a type historically performed by employees in a particular field if it was not unusual for such services to be performed by employees of organizations in that service field in the United States on December 13, 1980. (2)

The principles of the constructive stock ownership rules of IRC Section 318(a) apply. Thus, ownership will generally be attributed to an individual from his spouse, children, grandchildren and parents, between a partner and his partnership, between a trust or estate and its beneficiaries, and between a corporation and a more-than-50% shareholder (including a corporate shareholder). (3)

Two or more affiliated service groups will not be aggregated merely because an organization is an A organization or a B organization with respect to each affiliated service group. But all organizations which are A organizations or B organizations with respect to a single FSO must, together with that FSO, be treated as a single affiliated service group. (4)

Taxpayers may rely on the proposed regulations covering service-type affiliated groups until final rules are published. Examples explaining the tests for a "service-type" affiliated service group can be found in Revenue Ruling 81-105. (5)

Retroactive Disqualification

364. Can IRS apply retroactively its finding that a plan does not meet qualification requirements?

Yes. The IRS has broad discretion to determine the extent to which rulings and regulations will be given retroactive effect. (6) But the wide array of correction procedures established by the IRS in the past decade offers a choice of less severe remedies and suggests that the Service is reluctant to disqualify plans except under the most egregious circumstances.

The IRS may also retroactively correct its own mistaken application of law, even where a taxpayer may have relied to his detriment on the Service's mistake. (7) But concerning determination letters, the IRS has voluntarily limited its authority by the issuance of revenue procedures stating the standards by which the continuing effect of a determination letter will be judged. The standards are in substance as follows:

1. If a published revenue ruling is issued which is applicable to a previously approved plan, the plan, in order to retain its qualified status, must be amended to conform with that ruling before the end (and effective at least as of the beginning) of the first plan year following the one in which the ruling was published. (8) Thus, with respect to the approved plan, the revenue ruling is not given retroactive effect and becomes effective only at the beginning of the next plan year. (9)

2. If no applicable published ruling affecting the qualification of the plan has intervened between the approval and the revocation of the approval, the revocation will ordinarily not have retroactive effect with respect to the taxpayer to whom the ruling was originally issued or to a taxpayer whose tax liability was directly involved in such ruling if (a) there has been no misstatement or omission of material facts, (b) the facts subsequently developed are not materially different from the facts on which the ruling was based, (c) there has been no change in the applicable law, (d) the ruling was originally issued with respect to a prospective or proposed transaction, and (e) the taxpayer directly involved in the ruling acted in good faith in reliance upon the ruling and the retroactive revocation would be to his detriment. (1)

(1.) IRC Sec. 401(a)(14).

(2.) TEFRA, Sec. 242(b)(2); TRA '84, Sec. 521(d)(3).

(3.) IRC Sec. 401(a)(9); Treas. Reg. [section] 1.401(a)(9)-1, A-3(a).

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

(5.) P.L. 109-280, Sec. 823.

(6.) See Rev. Proc. 2006-27, 2006-22 IRB 945.

(1.) IRC Sec. 4974.

(2.) Treas. Reg. [section] 54.4974-2, A-7(a).

(3.) Treas. Reg. [section] 54.4974-2, A-7(b).

(4.) Notice 2009-82, 2009-41 IRB 491.

(5.) Treas. Reg. [section] 1.401(a)(9)-8, A-8.

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

(7.) IRC Sec. 401(a)(9)(C).

(8.) IRC Sec. 401(a)(9)(C)(ii)(I).

(9.) Let. Rul. 200453015.

(10.) Treas. Reg. [section] 1.401(a)(9)-2, A-2(e).

(1.) Treas. Reg. [section] 1.401(a)(9)-6, A-10.

(2.) Treas. Reg. [section] 1.401(a)(9)-2, A-3.

(3.) IRC Sec. 401(a)(9)(A).

(4.) Treas. Reg. [section] 1.401(a)(9)-9, A-2.

(5.) Treas. Reg. [section] 1.401(a)(9)-5, A-4.

(6.) Treas. Reg. [section] 1.401(a)(9)-5, A-4(b).

(7.) Treas. Reg. [section] 1.401(a)(9)-5, A-3(a).

(1.) Treas. Reg. [section] 1.401(a)(9)-5, A-3(b).

(2.) Treas. Reg. [section] 1.401(a)(9)-5, A-3(c)(1).

(3.) Treas. Reg. [section] 1.401(a)(9)-5, A-8.

(4.) Treas. Reg. [section] 1.401(a)(9)-5, A-1(a).

(5.) Treas. Reg. [section] 1.401(a)(9)-5, A-8.

(6.) Treas. Reg. [section] 1.401(a)(9)-2, A-4.

(7.) Treas. Reg. [section] 1.401(a)(9)-5, A-2.

(8.) Treas. Reg. [section] 1.401(a)(9)-7.

(9.) Treas. Reg. [section] 1.401(a)(9)-5, A-1(d).

(10.) Treas. Regs. [section] [section] 1.401(a)(9)-6, A-1(a); 1.401(a)(9)-6, A-3; see IRC Sec. 401(a)(9)(A).

(11.) Treas. Reg. [section] 1.401(a)(9)-6, A-1(b).

(12.) TD 9130, 2004-26 IRB 1082.

(1.) Let. Rul. 200635013.

(2.) Treas. Reg. [section] 1.401(a)(9)-6, A-1(c).

(3.) Treas. Reg. [section] 1.401(a)(9)-6, A-1(c)(1).

(4.) Treas. Reg. [section] 1.401(a)(9)-6, A-3(a).

(5.) Treas. Reg. [section] 1.401(a)(9)-6, A-6.

(6.) Treas. Reg. [section] 1.401(a)(9)-6, A-5.

(7.) IRC Sec. 401(a)(9)(C)(ii).

(8.) Treas. Reg. [section] 1.401(a)(9)-6, A-7(a).

(9.) Treas. Regs. [section] [section] 1.401(a)(9)-6, A-7(c), 1.401(a)(9)-6, A-7(d).

(1.) Treas. Reg. [section] 1.401(a)(9)-6, A-14(a).

(2.) Treas. Regs. [section] [section] 1.401(a)(9)-6, A-14(c), 1.401(a)(9)-6, A-14(e).

(3.) Treas. Regs. [section] [section] 1.401(a)(9)-6, A-14(d), 1.401(a)(9)-6, A-14(e).

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

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

(6.) Treas. Reg. [section] 1.401(a)(9)-6, A-13(c).

(7.) Treas. Reg. [section] 1.401(a)(9)-6, A-13(b).

(8.) Pursuant to IRC Sec. 401(a)(9)(F).

(1.) Treas. Reg. [section] 1.401(a)(9)-6, A-15.

(2.) Treas. Reg. [section] 1.401(a)(9)-8, A-10.

(3.) Treas. Reg. [section] 1.401(a)(9)-6, A-1(d).

(4.) P.L. 109-280, Sec. 823.

(5.) Treas. Reg. [section] 1.401(a)(9)-2, A-6(a).

(6.) Treas. Reg. [section] 1.401(a)(9)-6, A-10, A-11.

(1.) IRC Sec. 401(a)(9)(B)(iii); Treas. Reg. [section] 1.401(a)(9)-3, A-1(a).

(2.) Treas. Reg. [section] 1.401(a)(9)-3, A-3(a).

(3.) Treas. Reg. [section] 1.401(a)(9)-5, A-5(c)(1).

(4.) IRC Sec. 401(a)(9)(B)(ii), Treas. Reg. [section] 1.401(a)(9)-3, A-1(a).

(5.) Treas. Reg. [section] 1.401(a)(9)-3, A-2.

(6.) IRC Sec. 401(a)(9)(B)(iv); Treas. Reg. [section] 1.401(a)(9)-3, A-3(b).

(7.) IRC Sec. 401(a)(9)(B)(iv)(II); Treas. Reg. [section] 1.401(a)(9)-3, A-5.

(8.) Treas. Reg. [section] 1.401(a)(9)-5, A-5(c)(2).

(9.) Treas. Reg. [section] 1.401(a)(9)-3, A-5.

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

(11.) Treas. Regs. [section] [section] 1.401(a)(9)-1, A-3(c), 1.401(a)(9)-3, A-4(a).

(12.) Treas. Regs. [section] [section] 1.401(a)(9)-3, A-4(b), 1.401(a)(9)-3, A-4(c).

(1.) IRC Sec. 401(a)(9)(B)(i).

(2.) Treas. Reg. [section] 1.401(a)(9)-2, A-5.

(3.) Treas. Reg. [section] 1.401(a)(9)-4, A-4(a).

(4.) Treas. Reg. [section] 1.401(a)(9)-5, A-5(c)(3).

(5.) Treas. Reg. [section] 1.401(a)(9)-5, A-5(c)(1) or (2).

(6.) Treas. Regs. [section] [section] 1.401(a)(9)-5, A-5(c)(3), 1.401(a)(9)-5, A-5(a)(1).

(7.) IRC Sec. 401(a)(9)(E).

(8.) Treas. Reg. [section] 1.401(a)(9)-4, A-1.

(9.) Treas. Reg. [section] 1.401(a)(9)-4, A-1.

(10.) Treas. Reg. [section] 1.401(a)(9)-4, A-2.

(1.) Treas. Reg. [section] 1.401(a)(9)-4, A-4(a).

(2.) Treas. Reg. [section] 1.401(a)(9)-4, A-4(a).

(3.) Rev. Rul. 2005-36, 2005-26 IRB 1368.

(4.) Treas. Reg. [section] 1.401(a)(9)-4, A-3.

(5.) Treas. Reg. [section] 1.401(a)(9)-5, A-7(a)(1).

(6.) Treas. Reg. [section] 1.401(a)(9)-4, A-3.

(7.) Treas. Reg. [section] 1.401(a)(9)-5, A-7(b).

(8.) See Let. Rul. 200228025.

(9.) Treas. Reg. [section] 1.401(a)(9)-5, A-7(c)(1).

(1.) Treas. Reg. [section] 1.401(a)(9)-8, A-2(a)(2).

(2.) Treas. Reg. [section] 1.401(a)(9)-8, A-3.

(3.) Treas. Reg. [section] 1.401(a)(9)-8, A-2(a)(2).

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

(5.) See, e.g., Let. Ruls. 200307095, 200444033, 200528031.

(6.) See Let. Rul. 200537044.

(7.) Treas. Reg. [section] 1.401(a)(9)-8, A-2(a)(2).

(8.) See Let. Rul. 200317044.

(9.) Treas. Reg. [section] 1.401(a)(9)-4, A-5(b).

(1.) See Let. Rul. 200432027.

(2.) Treas. Reg. [section] 1.401(a)(9)-4, A-1.

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

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

(1.) Treas. Reg. [section] 1.401(a)(9)-4, A-6(c)(1).

(2.) Treas. Reg. [section] 1.401(a)(9)-4, A-6(c)(2).

(3.) Treas. Reg. [section] 1.401(a)(9)-8, A-5.

(4.) Treas. Reg. [section] 1.401(a)(9)-8, A-6(a).

(5.) Treas. Reg. [section] 1.401(a)(9)-8, A-6(b)(1).

(6.) Treas. Reg. [section] 1.401(a)(9)-8, A-6(b)(2).

(7.) Treas. Reg. [section] 1.401(a)(9)-8, A-6(c).

(1.) Treas. Reg. [section] 1.401(a)(9)-8, A-7.

(2.) Cf. Rev. Rul. 56-656, 1956-2 CB 280; Rev. Rul. 60-59, 1960-1 CB 154.

(3.) IRC Sec. 401(a)(9)(G); Treas. Reg. [section] 1.401(a)(9)-2, A-1(b).

(4.) Treas. Reg. [section] 1.401(a)(9)-5, A-1(d).

(5.) Treas. Reg. [section] 1.401(a)(9)-6, A-2(a).

(6.) Treas. Reg. [section] 1.401(a)(9)-6, A-2(b).

(7.) Treas. Reg. [section] 1.401(a)(9)-6, A-2(c).

(8.) Treas. Reg. [section] 1.401(a)(9)-6, A-2(c)(2).

(9.) Treas. Reg. [section] 1.401(a)(9)-6, A-2(c).

(10.) Treas. Reg. [section] 1.401(a)(9)-6, A-2(d).

(1.) Treas. Reg. [section] 1.401(a)(9)-6, A-3(a).

(2.) IRC Sec. 4974(a).

(3.) IRC Sec. 4974; Treas. Reg. [section] 54.4974-2, A-6.

(4.) Treas. Reg. [section] 54.4974-2, A-6.

(5.) IRC Sec. 4974(d); Treas. Reg. [section] 54.4974-2, A-7.

(6.) Treas. Reg. [section] 54.4974-2, A-7.

(1.) Treas. Reg. [section] 54.4974-2, A-3(c).

(2.) Treas. Reg. [section] 54.4974-2, A-4(b)(1)(ii).

(3.) Treas. Reg. [section] 54.4974-2, A-4(a).

(4.) Treas. Reg. [section] 54.4974-2, A-4(b)(1)(i).

(5.) Treas. Regs. [section] [section] 54.4974-2, A-4(b)(1)(ii), 54.4974-2, A-4(b)(3).

(6.) Treas. Reg. [section] 54.4974-2, A-4(b)(2).

(1.) Treas. Reg. [section] 54.4974-2, A-4(b)(2).

(2.) Treas. Regs. [section] [section] 54.4974-2, A-4(b)(2), 54.4974-2, A-4(b)(3).

(3.) Treas. Reg. [section] 54.4974-2, A-4(b)(2)(ii).

(4.) IRC Sec. 401(a)(13), ERISA Sec. 206(d).

(5.) IRC Sec. 401(a)(13)(C).

(6.) Yates v. Hendon, 124 S. Ct. 1330 (2004).

(7.) Patterson v. Shumate, 112 S.Ct. 2242 (1992).

(1.) Traina v. Sewell, 180 F.3d 707 (5th Cir. 1999), citing Baker v. LaSalle, 114 F.3d 636 (7th Cir. 1997).

(2.) See Rousey v. Jacoway, 125 S. Ct. 1561 (2005).

(3.) Let. Ruls. 9011037, 8910035, 8829009.

(4.) Let. Rul. 9109051.

(5.) In re Stones, 157 Bankr. 669 (Bankr. S.D.Ca. 1993).

(6.) In re Cohen, 2000 Bankr. LEXIS 268; In re Estes, 2000 Bankr. LEXIS 1264.

(7.) IRC Secs. 401(a)(13)(B), 414(p).

(8.) Let. Rul. 8735032.

(9.) Gallade v. Comm., 106 TC 355 (1996).

(10.) Treas. Reg. [section] 1.401(a)-13(b)(1); Iannone v. Comm., 122 TC 287 (2004).

(11.) FSA 199930039.

(12.) Asbestos Workers Local No. 23 Pension Fund v. U.S., 303 F.Supp. 551 (D.C. Pa. 2004).

(13.) See Let. Rul. 200342007.

(1.) Let. Rul. 200426027.

(2.) IRC Sec. 401(a)(13).

(3.) IRC Sec. 401(a)(13)(C)(iii).

(4.) See IRC Sec. 401(a)(13)(D).

(5.) IRC Sec. 401(a)(13)(A); Treas. Reg. [section] 1.401(a)-13(d)(1).

(6.) Let. Rul. 8905058.

(7.) GCM 39858 (9-9-91).

(8.) FrancisJungers, Sole Proprietorship v. Comm., 78 TC 326 (1982), acq. 1983-1 CB 1.

(9.) Treas. Reg. [section] 1.401(a)-13(d)(2); Rev. Rul. 89-14, 1989-1 CB 111.

(1.) Treas. Regs. [subsection] 1.401(a)-13(d), 1.401(a)-13(e); TD 7534.

(2.) Stobnicki v. Textron, Inc., 868 F.2d 1460 (5th Cir. 1989).

(3.) IRC Secs. 401(a)(13)(B), 414(p).

(4.) IRC Sec. 414(p)(1).

(5.) IRC Sec. 414(p)(11).

(6.) 1997-1 CB 379.

(7.) Hawkins v. Comm. 86 F.3d 982 (10th Cir. 1996), rev'g 102 TC 61.

(8.) Samaroo v. Samaroo, 193 F.3d 185 (3rd Cir. 1999).

(9.) See Let. Rul. 200252097.

(10.) See Hogan v. Raytheon, 2002 U.S. App. Lexis 18724 (8th Cir. 2002); Trustees of the Directors Guild of America-Producer Pension Benefits Plans v. Tise, 2000 U.S. App. Lexis 31161 (9th Cir. 2000); see also IRC Sec. 414(p)(7), ERISA Sec. 206(d)(3)(H).

(1.) See P.L. 109-280, Sec. 1001.

(2.) See Metropolitan Life Ins. Co. v. Fowler, 922 F. Supp. 8 (E.D. MI 1996), rev'g Metropolitan Life Ins. Co. v. Person, 805 F. Supp. 1411 (E.D. MI 1992). See also, Let. Rul. 9334032.

(3.) See Metropolitan Life Ins. Co. v. Wheaton, 42 F.3d 1080 (7th Cir. 1994).

(4.) See Treas. Regs. [section] [section] 1.403(b)-10(c); 1.403(b)-11(a).

(5.) IRC Sec. 414(p)(4)(B).

(6.) Treas. Reg. [section] 1.401(a)-13(g)(3).

(7.) Let. Ruls. 9234014, 200252093.

(8.) IRC Sec. 414(p)(5); Treas. Reg. [section] 1.401(a)-13(g)(4).

(9.) Dugan v. Clinton, 1987 U.S. Dist. LEXIS 4276 (N.D. Ill. 1987).

(10.) IRC Secs. 414(p)(6), 414(p)(7).

(1.) DOL Adv. Op. 99-13A.

(2.) DOL Adv. Op. 92-17A.

(3.) Blue v. UAL Corp., 160 F.3d 383 (7th Cir. 1998).

(4.) DOL Adv. Op. 2004-02A.

(5.) Schoonmaker v. The Employee Sav. Plan of Amoco Corp., 987 F.2d 410 (7th Cir. 1993).

(6.) DOL Adv. Op. 94-32A.

(7.) IRC Sec. 401(a)(10)(B).

(8.) For rules and exemptions, see Treas. Regs. [section] [section] 1.416-1, T-35 to 1.416-1, T-38.

(9.) IRC Sec. 401(a)(10)(B).

(10.) IRC Secs. 416(g)(4)(G), 401(k)(11)(D)(ii); IRC Sec. 416(g)(4)(H)6.

(1.) IRC Sec. 416(g)(1)(A).

(2.) Treas. Regs. [section] [section] 1.416-1, T-26, 1.416-1, T-28.

(3.) IRC Sec. 416(g)(4)(C).

(4.) Treas. Reg. [section] 1.416-1, T-24.

(5.) Treas. Reg. [section] 1.416-1, T-25.

(6.) IRC Sec. 416(g)(4)(F).

(7.) IRC Sec. 416(g)(3)(A); Reg. [section] 1.416-1, T-30, T-31.

(8.) IRC Sec. 416(g)(3)(B).

(9.) IRC Sec. 416(g)(4)(E).

(1.) IRC Sec. 416(i)(5); Treas. Reg. [section] 1.416-1, T-12.

(2.) See IRC Sec. 416(i)(1)(A), prior to amendment by EGTRRA 2001.

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

(4.) See Treas. Reg. [section] 1.416-1, T-3.

(5.) Treas. Reg. [section] 1.416-1, T-9.

(6.) Treas. Reg. [section] 1.416-1, T-23.

(1.) IRC Sec. 416(i)(6).

(2.) IRC Sec. 416(g)(4)(A); Treas. Reg. [section] 1.416-1, T-32.

(3.) Treas. Reg. [section] 1.416-1, T-39.

(4.) Guidelines for applying the top-heavy rules may be found in Treas. Reg. [section] 1.416-1.

(1.) IRC Sec. 416(b)(1)(A).

(2.) IRC Sec. 416(b)(1)(B).

(3.) IRC Sec. 416(b)(2); see Treas. Regs. [subsection] 1.416-1, V-1; 1.416-1, V-2.

(4.) Treas. Reg. [section] 1.416-1, V-3.

(5.) See Treas. Reg. [section] 1.416-1, V-7; For additional rules regarding vesting in a top-heavy plan, see Treasury Regulations. [subsection] 1.416-1, V-5 and 1.416-1, V-6.

(6.) IRC Sec. 416(c); Treas. Reg. [section] 1.416-1, M-1.

(7.) For the non-key employees for which a minimum benefit is not required, see Treasury Regulation [section] 1.416-1, M-4.

(8.) IRC Sec. 416(c)(1)(C)(iii).

(1.) IRC Sec. 416(c)(1)(D)(i).

(2.) IRC Sec. 416(c)(1)(D)(ii).

(3.) IRC Sec. 416(c)(1)(D)(iii).

(4.) IRC Sec. 416(c)(1)(E); Treas. Regs. [section] [section] 1.416-1, M-2, 1.416-1, M-3.

(5.) IRC Sec. 416(c)(2); Treas. Reg. [section] 1.416-1, M-7 to M-9.

(6.) IRC Sec. 401(a)(17); Treas. Reg. [section] 1.416-1, M-7; IR-2009-94, Oct. 15, 2009.

(7.) Treas. Reg. [section] 1.416-1, M-20.

(8.) Treas. Regs. [section] [section] 1.416-1, M-18, 1.416-1, M-19.

(9.) IRC Sec. 416(c)(2)(B)(ii)(II).

(10.) See TEFRA Conf. Rep., 1982-2 CB 677; see IRC Sec. 416(f).

(11.) See Treas. Reg. [section] 1.416-1, M-12.

(1.) IRC Sec. 416(i)(4).

(2.) IRC Sec. 416(e).

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

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

(5.) Treas. Reg. [section] 1.414(l)-1.

(6.) IRC Sec. 401(a)(14); Treas. Reg. [section] 1.401(a)-14(c).

(7.) TIR 1334 (1/8/75), M-3.

(8.) IRC Sec. 401(a)(15).

(1.) Treas. Reg. [section] 1.401(a)-15(d).

(2.) IRC Sec. 401(a)(19); Treas. Reg. [section] 1.401(a)-19(b).

(3.) IRC Sec. 401(a)(17)(A); IR-2009-94.

(4.) See IRC Sec. 401(a)(17)(B); Treas. Reg. [section] 1.401(a)(17)-1(a).

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

(6.) See Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318 (1992).

(7.) IRC Sec. 401(c)(1).

(8.) IRC Secs. 414(b), 414(c); Treas. Regs. [section] [section] 1.414(b)-1, 1.414(c)-1 to 1.414(c)-5.

(9.) IRC Sec. 414(m); Prop. Treas. Reg. [section] 1.414(m)-1.

(10.) IRC Sec. 414(n).

(1.) See Garland v. Comm., 73 TC 5 (1979); Thomas Kiddie, M.D., Inc. v. Comm., 69 TC 1055 (1978).

(2.) IRC Sec. 414(n)(1).

(3.) IRC Sec. 414(n)(2).

(4.) 503 U.S. 318 (1992).

(5.) Burrey v. Pacific Gas and Elect. Co., 1998 U.S. App. Lexis 26594 (9th Cir. 1998); General Explanation of Tax Legislation Enacted in the 104th Congress (JCT-12-96), p. 173 (the 1996 Blue Book).

(6.) See Abraham v. Exxon Corp., 85 F.3d 1126 (5th Cir. 1996); Bronk v. Mountain States Tel. & Tel., Inc., 21 EBC 2862 (10th Cir. 1998).

(7.) 1984-2 CB 469, A-14.

(8.) 21 EBC 2862 (10th Cir. 1998).

(9.) IRC Sec. 414(n)(6)(B).

(1.) IRC Secs. 414(n)(6)(A), 414(a)(3).

(2.) IRC Sec. 414(n)(5).

(3.) IRC Sec. 414(n)(2). See Burnetta v. Comm., 68 TC 387 (1977).

(4.) IRC Sec. 414(n)(5)(C)(ii).

(5.) See Professional & Executive Leasing, Inc. v. Comm., 89 TC 225 (1987), aff'd Dkt. 87-7379 (9th Cir. 12-6-88).

(6.) Temp. Treas. Reg. [section] 1.414(q)-1T, A-2.

(1.) IRC Sec. 414(q)(1); IR-2009-94.

(2.) IRC Sec. 414(q)(1). See Temp. Treas. Reg. [section] 1.414(q)-1T, A-3(c)(1).

(3.) Temp. Treas. Reg. [section] 1.414(q)-1T, A-3(c)(2); Information Letter to Kyle N. Brown dated December 9, 1999.

(4.) Rev. Proc. 93-42, 1993-2 CB 540, as modified by Rev. Proc. 95-34, 1995-2 CB 385.

(5.) Notice 97-45, 1997-2 CB 296.

(6.) IRC Sec. 414(q)(3).

(7.) Notice 97-45, 1997-2 CB 296.

(8.) Temp. Treas. Reg. [section] 1.414(q)-1T, A-9(c).

(9.) Notice 97-45, 1997-2 CB 296.

(10.) Notice 97-45, 1997-2 CB 296.

(11.) IRC Sec. 414(q)(8).

(12.) Temp. Treas. Reg. [section] 1.414(q)-1T, A-3(b).

(13.) Temp. Treas. Reg. [section] 1.414(q)-1T, A-3(d).

(1.) IRC Sec. 414(q)(9).

(2.) IRC Sec. 414(q)(4); Temp. Treas. Reg. [section] 1.414(q)-1T, A-13.

(3.) IRC Sec. 414(q)(5); Temp. Treas. Reg. [section] 1.414(q)-1T, A-9(b).

(4.) See Temp. Treas. Reg. [section] 1.414(q)-1T, A-9(e).

(5.) See Temp. Treas. Reg. [section] 1.414(q)-1T, A-9(f).

(6.) Temp. Treas. Reg. [section] 1.414(q)-1T, A-9(b).

(7.) IRC. Sec. 414(q)(5). See Temp. Treas. Reg. [section] 1.414(q)-1T, A-9(b)(2)(i).

(8.) Temp. Treas. Reg. [section] 1.414(q)-1T, A-9(b)(2)(ii).

(9.) Temp. Treas. Reg. [section] 1.414(q)-1T, A-4.

(10.) Temp. Treas. Reg. [section] 1.414(q)-1T, A-5.

(1.) IRC Sec. 414(q)(7).

(2.) Temp. Treas. Reg. [section] 1.414(q)-1T, A-6, A-8.

(3.) IRC Sec. 416(i); IR-2009-94; Treas. Reg. [section] 1.416-1, T-12.

(4.) Treas. Reg. [section] 1.416-1, T-13; Rev. Rul. 80-314, 1980-2 CB 152.

(5.) Treas. Reg. [section] 1.416-1, T-15.

(6.) IRC Sec. 416(i), flush language.

(7.) IRC Secs. 416(i)(1), 414(q)(5).

(8.) Treas. Reg. [section] 1.416-1, T-14.

(1.) IRC Sec. 416(i)(1)(B); Treas. Regs. [section] [section] 1.416-1, T-17; 1.416-1, T-8.

(2.) Treas. Reg. [section] 1.416-1, T-16.

(3.) IRC Secs. 416(i)(1)(D), 414(q)(4), 415(c)(3).

(4.) Treas. Reg. [section] 1.416-1, T-19.

(5.) IRC Sec. 416(i)(1)(A).

(6.) IRC Sec. 416(i)(5). Treas. Reg. [section] 1.416-1, T-12.

(7.) IRC Sec. 416(i).

(8.) IRC Sec. 401(c)(3).

(9.) Hill, Farrer &Burrill v. Comm., 67 TC 411 (1976).

(10.) IRC Sec. 401(c)(4).

(1.) IRC Sec. 401(c)(4).

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

(3.) See Durando v. U.S., 95-2 USTC 1150,615 (9th Cir. 1995).

(4.) Treas. Reg. [section] 31.3121(d)-1(c)(2).

(5.) Treas. Reg. [section] 1.401-10(b)(3). See also IRC Sec. 7701(a)(20); IRS Pub. 560.

(6.) See Rev. Rul. 68-324, 1968-1 CB 433.

(1.) Pulver v. Comm., TC Memo 1982-437; Treas. Reg. [section] 1.401-10(b)(3)(ii).

(2.) Reece v. Comm.,TC Memo 1992-335.

(3.) Rev. Rul. 70-411, 1970-2 CB 91.

(4.) IRC Secs. 414(b), 414(c).

(5.) Treas. Reg. [section] 1.414(b)-1.

(6.) U.S. v. VogelFertilizer Co., 49 AFTR 2d 82-491 (Sup. Ct. 1982); Treas. Reg. [section] 1.1563-1T(a)(3).

(7.) IRC Secs. 414(b), 1563; Treas. Reg. [section] 1.414(b)-1.

(8.) IRC Sec. 1563(d); Treas. Reg. [section] 1.414(b)-1.

(1.) Aero Indus. Co, Inc. v. Comm., TC Memo 1980-116.

(2.) Fujinoon Optical, Inc. v. Comm., 76 TC 499 (1981).

(3.) IRC Sec. 414(c); Treas. Regs. [section] [section] 1.414(c)-1, 1.414(c)-2, 1.414(c)-3, 1.414(c)-4.

(4.) IRC Sec. 414(m)(1).

(5.) IRC Sec. 414(m); Prop. Treas. Reg. [section] 1.414(m)-2(c)(1).

(6.) IRC Sec. 414(m)(5).

(7.) IRC Sec. 414(m)(3); Prop. Treas. Reg. [section] 1.414(m)-2(f). See Rev. Rul. 81-105, 1981-1 CB 256.

(1.) Prop. Treas. Reg. [section] 1.414(m)-2(c)(2).

(2.) Prop. Treas. Reg. [section] 1.414(m)-2(c)(3).

(3.) IRC Sec. 414(m)(6)(B).

(4.) Prop. Treas. Reg. [section] 1.414(m)-2(g).

(5.) 1981-1 CB 256.

(6.) Automobile Club of Mich. v. Comm., 353 U.S. 180 (1957); IRC Sec. 7805(b).

(7.) Dixon v. U.S., 381 U.S. 68 (1965).

(8.) Rev. Proc. 92-6, 1992-1 CB 611, at Sec. 21.

(9.) See also Wisconsin Nipple and Fabricating Corp. v. Comm., 78-2 USTC 84,934 (7th Cir. 1978).

(1.) Rev. Proc. 2009-4, 2009-1 IRB 118, Sec. 13.05. See also Lansons, Inc. v. Comm., 622 F.2d 774 (5th Cir. 1980); Oakton Distributors, Inc. v. Comm., 73 TC 182 (1979); Pittman Construction v. U.S., 437 F. Supp. 1215 (E.D. La. 1977).
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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
Words:24773
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