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Editor's Note - The following language was provided to me on July 28, 1998 by the IRS EP/EO Division in Baltimore in connection with a Form 5310 I had filed with the Covington KY Service Center for a pair of terminating calendar-year profit sharing and money purchase pension plans that chose to use a termination date of July 31, 1998. (The plan documents are Corbel regional prototype plans.) This language might be helpful to plan sponsors interested in knowing the types of language amendments that are being required for terminating plans. [Bracketed language] is mine. -- Dave Baker, davebaker@benefitslink.com DEFINED CONTRIBUTION PLANS WITHOUT 40l(k) AND/OR 401(m) PROVISIONS SBJPA SUPPLEMENT[AL] AMENDMENTS FOR PLAN TERMINATION The attached sample amendments contain suggested language prepared by the Ohio Key District and are intended to permit the plan to comply in its form with the provisions of the Small Business Job Protection Act of 1996 (SBJPA). The amendment provisions are effective for plan years beginning after December 31, 1996, unless otherwise indicated. The attached amendments are only available to plans which have been in compliance in their entirety with the requirements of the Tax Reform Act of 1986. Note: The attached sample amendments are NOT model language from the National Office. R 10/20/97
Section 401(a)(9) Required Distributions Non-5-percent Owner: The employer may elect one of the following options: ( ) no amendment will be made to the plan for section 40l(a)(9) of the Code. The term "required beginning date" will continue to be defined as April 1 of the calendar year following the calendar year in which the participant attains age 70 1/2. 5-percent Owner: The required beginning date for a participant who is a 5-percent owner (as described in section 416(i) of the Code) is April 1 of the calendar year following the calendar year in which the participant attains age 70 1/2. The requirement that distributions to a 5-percent owner (as described in section 416(i) of the Code) commence as of April 1 of the calendar year following the calendar year in which the participant attains age 70 1/2 shall not apply in the case of a governmental plan or church plan. R 10/20/97
IRC Section 414(q) Highly Compensated Employees Effective date: Plan Years beginning after December 31, 1996, except that, in determining whether an employee is a highly compensated employee in 1997, the amendments are treated as having been in effect in 1996. The term "highly compensated employee" includes highly compensated active employees and highly compensated former employees. A highly compensated active employee means any employee who (A) was a 5-percent owner (as defined in section 416(i)(i) of the Code) of the employer at any time during the current or the preceding year, or (B) for the preceding year - (i) had compensation from the employer in excess of $80,000 (as adjusted by the Secretary pursuant to section 415(d) of the Code, except that the base period shall be the calendar quarter ending September 30, 1996), and (ii) if the employer elects the application of this clause for such preceding year, was in the top-paid group of employees for such preceding year. For this purposes, [sic] an employee is in the top-paid group of employees for any year if such employee is in the group consisting of the top 20 percent of the employees when ranked on the basis of compensation paid during such year. A former employee shall be treated as a highly compensated employee if: (A) such employee was a highly compensated employee when such employee separated from service, or (B) such employee was a highly compensated employee at any time after attaining age 55. The determination of who is a highly compensated employee, including the determinations of the number and identity of employees in the top-paid group, will be made in accordance with section 414(q) of the Code and the regulations thereunder. For purposes of this subsection, the term "compensation" means compensation within the meaning of section 415(c)(3) of the Code. The determination will be made without regard to sections 125, 402(e)(3), and 402(h)(1)(B) of the Code, and in the case of employer contributions made pursuant to a salary reduction agreement, without regard to section 403(b) of the Code. For plan years beginning after December 31, 1997, for purposes of this subsection, the term "compensation" means compensation within the meaning of section 415(c)(3) of the Code. Family Aggregation Rules Effective for plan years beginning after December 31, 1996, the family aggregation rules required by IRC section 414(q)(6) of the Code have been deleted from the plan. This subsection is subject to the plan amendment rules of section 1.401(a)(4)-5(a) of the regulations. R 1/23/98
IRC Section 401(a)(17) Family Aggregation Rules The plan is amended to delete the provision of family aggregation as described in section 401(a)(17)(A) of the Code which requires certain plan participant, [sic] the spouse of such participant and any lineal descendants who have not attained age 19 before the close of the plan year to be treated as a single participant for purposes of applying the limitation on compensation for a plan year. Section 417(a)(7)(A) Special Rule Relating To Time For Written Explanation The written explanation described in section 417(a)(3)(A) of the Code may be provided after the annuity starting date. The 90-day applicable election period to waive the qualified joint and survivor annuity described in section 417(a)(6)(A) of the Code, shall not end before the 30th day after the date on which such explanation is provided. The Secretary may by regulations limit the period of tine by which the annuity starting date precedes the provision of the written explanation other than by providing that the annuity starting date may not be earlier than termination of employment. A participant may elect (with any applicable spousal consent) to waive any requirement that the written explanation be provided at least 30 days before the annuity starting date (or to waive the 30-day requirement under the above paragraph) if the distribution commences more than 7 days after such explanation is provided. Section 414(n)(2) Treatment of Leased Employees The plan is amended to define the term "Leased Employee" as any person (other than an employee of the recipient) who pursuant to an agreement between the recipient and any other person ("leasing organization") has performed services for the recipient (or for the recipient and related persons determined in accordance with section 414(n)(6) of the Code) on a substantially full-time basis for a period of at least 1 year, and such services are performed under primary direction or control by the recipient. Section 415(c)(3)(C) Special Rules For Permanent And Total Disability If the plan provides for the continuation of contributions for a fixed or determinable period on behalf of all participants who are permanently and totally disabled (as defined in section 22(e)(3) of the Code), the employer may make contributions on behalf of such employee [sic] including Highly Compensated Employee (as defined in section 414(q) of the Code), without first making the election required by section 415(c)(3)(C)(iii) of the Code. [No revision date shown on my copy from the IRS -- BenefitsLink Editor]
GATT AMENDMENT FOR DEFINED CONTRIBUTION PLANS TERMINATING AFTER 12/31/96 Public Law 103-465, section 732(b)(2) amended section 415(c)(l)(A) of the Internal Revenue Code (the "Code) by deleting the phrase "(or, if greater, 1/4 of the dollar limitation in effect under subsection (b)(l)(A)" immediately following "$30,000". The following amendment to section _______ of the __________________________________ (the Plan) is effective for plan years beginning after December 31, 1994 in order to bring the Plan's Code section 415 provisions into compliance with the General Agreement of [sic] Tariffs and Trade (GAAT) [sic]: Such section is hereby amended: "Notwithstanding any other provisions of the Plan, contributions and other additions with respect to a participant exceed the limitation of Code section 415(c) if, when expressed as an annual addition (within the meaning of Code section 415(c)(2)[)] to the participant's account, such annual addition is greater than the lesser of - (A) $30,000, or SIGNATURE: _______________________________ TITLE: ___________________________________ DATE: ____________________________________ [No revision date shown on my copy from the IRS -- BenefitsLink Editor]
Section 414(u) Special Rules Relating to Veterans Reemployment Rights Under USERRA Effective date: As of December 12, 1994. "Notwithstanding any provision of this plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with section 414(u) of the Internal Revenue Code." The following amendment may be used to amend plans that provide for loans to participants, if the sponsor chooses to suspend loan repayments during participant's [sic] periods of military service. ["]( ) Loan repayments will be suspended under this plan as permitted under section 414(u)(4) of the Internal Revenue Code." R 10/20/97
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