Kent Allard

https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR2b7577e2af5412b/section-1.436-1 URL: https://www.ecfr.gov/current/title-26/part-1/section-1.436-1#p-1.436-1(a)(3)(ii)(B) Citation: 26 CFR 1.436-1(a)(3)(ii)(B) Application of section 436 after termination of a plan — (A) In general. Except as otherwise provided in paragraph (a)(3)(ii)(B) of this section, any section 436 limitations in effect immediately before the termination of a plan do not cease to apply thereafter. (B) Exception for payments pursuant to plan termination. The limitations under section 436(d) and paragraph (d) of this section do not apply to prohibited payments (within the meaning of paragraph (j)(6) of this section) that are made to carry out the termination of a plan in accordance with applicable law. For example, a plan sponsor's purchase of an irrevocable commitment from an insurer to pay benefit liabilities in connection with the standard termination of a plan in accordance with section 4041(b)(3) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and in accordance with 29 CFR 4041.28, does not violate section 436(d) or this section. __________________________________________________________________________________________________________________________________________________________________________________________________ Please indicate if unpredictable contingent event benefits form part of the exceptions for plan terminations.

The reply seems aptly descriptive, requesting official guidance on where to locate official guidance condoning restricting the logged service to service provided while in participant mode.

To irenically, placidly, and pleasantly embellish the inquiry, please locate/identify the official guidance which indicates the drafting of the instrument, the plan stipulations, may restrict the service reckoned for this situation to only service provided while in participant mode. The guidance consulted lacks mention of years of participation as an acceptable descriptor/determiner with which to constrain the tallied service. If guidance further to the Treasury Regulations has broached such a situation, please describe this official guidance and where to locate such guidance, the provenance of said guidance.

Please indicate if the years of service of which defined benefit minimum serve as a function must also occur as years of participation. URL https://www.ecfr.gov/current/title-26/section-1.416-1 Citation 26 CFR § 1.416-1 M-2 Q. What is the defined benefit minimum? A. (a) The defined benefit minimum requires that the accrued benefit at any point in time must equal at least the product of (i) an employee's average annual compensation for the period of consecutive years (not exceeding five) when the employee had the highest aggregate compensation from the employer and (ii) the lesser of 2% per year of service with the employer or 20%. (b) For purposes of the defined benefit minimum, years of service with the employer are generally determined under the rules of section 411(a) (4), (5) and (6). However, a plan may disregard any year of service if the plan was not top-heavy for any plan year ending during such year of service, or if the year of service was completed in a plan year beginning before January 1, 1984. (c) In determining the average annual compensation for a period of consecutive years during which the employee had the largest aggregate compensation, years for which the employee did not earn a year of service under the rules of section 411(a) (4), (5), and (6) are to be disregarded. Thus, if an employee has received compensation from the employer during years one two, and three, and for each of these years the employee earned a year of service, then the employee's average annual compensation is determined by dividing the employee's aggregate compensation for these three years by three. If the employee fails to earn a year of service in the next year, but does earn a year of service in the fifth year, the employee's average annual compensation is calculated by dividing the employee's aggregate compensation for years one, two, three, and five by four. The compensation required to be taken into account is the compensation described in Question and Answer T-21. In addition, compensation received for years ending in plan years beginning before January 1, 1984, and compensation received for years beginning after the close of the last plan year in which the plan is top-heavy may be disregarded. M-2 seems to allow the reckoning of average compensation to remain vague, though usually § 415 amounts apply for this situation. If so, please indicate if the amendment of 415 as described affected 416 defined benefit minimums. 26 USC 415: Limitations on benefits and contribution under qualified plans (3) Average compensation for high 3 years For purposes of paragraph (1), a participant's high 3 years shall be the period of consecutive calendar years (not more than 3) during which the participant both was an active participant in the plan and had the greatest aggregate compensation from the employer. In the case of an employee within the meaning of section 401(c)(1), the preceding sentence shall be applied by substituting for "compensation from the employer" the following: "the participant's earned income (within the meaning of section 401(c)(2) but determined without regard to any exclusion under section 911)". https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section415&num=0&edition=prelim Subsec. (b)(3). Pub. L. 109–280, §832(a), struck out "both was an active participant in the plan and" before "had the greatest".

Per the obvious citation, when amendment of vesting schedules occurs, the emendations must allow for the apt extant participants to retain the vesting schedule as if unaffected by the amendment, at least perhaps for balances already accrued. The salient participants entail the participants who had provided suitable amounts of service, the excerpt herein lacks adjustment for subsequent amendments reducing the anticipated service favorably for the participants. URL https://www.ecfr.gov/current/title-26/part-1/section-1.411(a)-8#p-1.411(a)-8(b)(3) Citation 26 CFR 1.411(a)-8(b)(3) (b) Election of former schedule — (1) In general. Under section 411 (a)(10)(B), for plan years for which section 411 applies, if the vesting schedule of a plan is amended, the plan will not be treated as meeting the minimum vesting standards of section 411 (a)(2) unless the plan as amended, provides that each participant whose nonforfeitable percentage of his accrued benefit derived from employer contributions is determined under such schedule, and who has completed at least 5 years of service with the employer, may elect, during the election period, to have the nonforfeitable percentage of his accrued benefit derived from employer contributions determined without regard to such amendment. Notwithstanding the preceding sentence, no election need be provided for any participant whose nonforfeitable percentage under the plan, as amended, at any time cannot be less than such percentage determined without regard to such amendment. (3) Service requirement. For purposes of subparagraph (1) of this paragraph, a participant shall be considered to have completed 5 years of service if such participant has completed 5 years of service, whether or not consecutive, without regard to the exceptions of section 411(a)(4) prior to the expiration of the election period described in subparagraph (2) of this paragraph. For the meaning of the term “year of service”, see regulations prescribed by the Secretary of Labor under 29 CFR Part 2530, relating to minimum standards for employee pension benefit plans. https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-D/part-2530 Seemingly periods of service remain barred for this situation. To describe the garbled jargon, while 29 CFR Part 2530 features the term "period of service", the illocution/intent therein seems inconsistent with the use of said term to indicate the reckoning of service lacking logging of provided hours, rather as long as the employment relationship remains intact, service accrues. This situation has disadvantages to individuals who provide 1K hours to the endorsing entity during a plan year while departing prior to the conclusion of the plan year. URL https://www.ecfr.gov/current/title-26/part-1/section-1.410(a)-7#p-1.410(a)-7(a) Citation 26 CFR 1.410(a)-7(a)

C. B. Zeller, I appreciate your reply. Perhaps only slightly connected to the situation, while perhaps worth mentioning here, a further Revenue Ruling on normal retirement age/date: Revenue Ruling 81-211 Internal Revenue Service 1981-2 C.B. 98 http://www.legalbitstream.com/scripts/isyswebext.dll?op=get&uri=/isysquery/irla46c/1/doc Advice has been requested whether the pension plan described below satis­fies the requirement of section 411(a) of the Internal Revenue Code, that an employee's right to the normal retire­ment benefit is nonforfeitable upon at­tainment of normal retirement age. A pension plan provides that an em­ployee's right to the normal retirement benefit under the plan is nonforfeit­able at the normal retirement date. The normal retirement date is the first day of the calendar month following the date on which the employee attains age 65. Section 401(a)(7) of the Code pro­vides that a plan shall not be a quali­fied plan under section 401(a) unless it satisfies the requirements of section 411. Section 411(a) of the Code requires that an employee's right to the normal retirement benefit under the plan must be nonforfeitable upon the at­tainment of normal retirement age as defined in section 411(a)(8). Section 411(a)(8) provides that normal retire­ment age means the earlier of: (a) the normal retirement age under the plan, or (b) the later of age 65 or the tenth anniversary of the time participation commenced. In this case, an employee's right to the normal retirement benefit be­comes nonforfeitable on the em­ployee's normal retirement date, which will occur from one day to one month after the date the employee at­tains age 65. However, the normal re­tirement date may not occur until after the employee's normal retire­ment age as defined in section 411(a)(8) of the Code. Accordingly, the pension plan does not satisfy the requirement of section 411(a) of the Code, that the em­ployee's normal retirement benefit be nonforfeitable at normal retirement age. Therefore, the plan is not quali­fied under section 401(a). ____________________________________________________________________________________________________________________________________________________________ Intervening amendments have the reference to the tenth (10th) anniversary as reduced to the fifth (5th) anniversary. Seemingly the conclusion directs the normal retirement date, which might mark from when distributions may proceed, may occur subsequent to the normal retirement age provided all of the amounts have vested as of the normal retirement age. "However, the normal re­tirement date may not occur until after the employee's normal retire­ment age as defined in section 411(a)(8) of the Code" seems an unanticipated way to express this notion. Perhaps more expansively, removing the confusing conjunction "until", the intent seems: "However, unless all of the amounts have vested ahead of the normal retirement date, the normal re­tirement date may not occur after the employee's normal retire­ment age as defined in section 411(a)(8) of the Code".

While perhaps serving as other to the locus classicus on this situation, the veracity of the presentation above would proceed as bolstered by evaluation on this board. The proviso of "participation commences on the first day of the first year in which the participant commenced his participation in the plan..." does seem to suggest the mere passage of the interval described affects the situation, with the amount of accumulated service for vesting/eligibility/benefit accrual/allocation(s) inapplicable. If the normal retirement date served to the slightest extent as a function of accumulated service, the reckoning of the commencement of participation would seem perhaps odd. The inquiry for this post: Unhelpfully, 26 CFR § 1.411(a)-7(b)(1)(ii) seems to use the word "year" lacking any consideration of plan years occurring as other to routine calendar years ending on December 31 (12/31). If further guidance has supplied how the situation proceeds mutatis mutandis for plan years calibrated other to December 31 (12/31) ends, please provide the references for said guidance.

From § 411(a)(8) For purposes of this section, the term "normal retirement age" means the earlier of- (A) the time a plan participant attains normal retirement age under the plan, or (B) the later of- (i) the time a plan participant attains age 65, or (ii) the 5th anniversary of the time a plan participant commenced participation in the plan. ____________________________________________________________________________________________________________________________________________________________________ The reference to the "5th anniversary" might seem ambiguous as to whether the accumulation or providing of five (5) years of vesting service/service otherwise might affect the situation. Guidance would seem to suggest the anniversary applies unaffected by the providing of a particular metric of years of service, vesting or otherwise. To consult extensive guidance on this situation: URL: https://www.ecfr.gov/current/title-26/part-1/section-1.411(a)-7#p-1.411(a)-7(b)(1)(ii) Citation: 26 CFR § 1.411(a)-7(b)(1)(ii) For purposes of paragraph (b)(1)(ii)(B) of this section, participation commences on the first day of the first year in which the participant commenced his participation in the plan, except that years which may be disregarded under section 410(a)(5)(D) may be disregarded in determining when participation commenced. https://uscode.house.gov/view.xhtml?req=(title:26 section:410 edition:prelim) OR (granuleid:USC-prelim-title26-section410)&f=treesort&edition=prelim&num=0&jumpTo=true#substructure-location_a_5_D [T]he number of consecutive 1-year breaks in service within such period equals or exceeds the greater of- (I) 5, or (II) the aggregate number of years of service before such period. (ii) Years of service not taken into account If any years of service are not required to be taken into account by reason of a period of breaks in service to which clause (i) applies, such years of service shall not be taken into account in applying clause (i) to a subsequent period of breaks in service. _______________________________________________________________________________________________________________________________________________________________________ Revenue Ruling 84-69 Internal Revenue Service 1984-1 C.B. 125 26 CFR 1.411(a)-1: Minimum vesting stand­ards; general rules. Qualification; effect of plan lan­guage on the vested accrued benefit at normal retirement age. A plan that limits an employee's right to nonforfeitable benefits to amounts in which the employee already has a nonforfeitable interest pursuant to the plan's vesting schedule does not satisfy the requirements of section 411 (a) of the Code. Rev. Rul. 84-69 ISSUE Does the retirement plan described below satisfy the minimum vesting provisions of section 411 of the Inter­nal Revenue Code? FACTS An employer maintains a noncon­tributory retirement plan which in­cludes a vesting schedule under which an employee who has at least 10 years of service has a nonforfeitable right to 100 percent of his accrued benefit. The vesting schedule satisfies the re­quirements of the section 411 (a)(2)(A) of the Code. In addition, the plan provides that an employee's right to the normal retirement benefit under the plan is nonforfeitable upon attainment of the normal retirement age (which the plan defines as age 65). Other plan language defines the term normal retirement benefit as the por­tion of the employee's accrued bene­fit determined under the plan's vest­ing schedule to be nonforfeitable. As a result, employees hired after age 55 who retire at normal retirement age are not entitled to any retirement benefit. LAW AND ANALYSIS Section 401(a)(7) of the Code pro­vides that a plan shall not be a quali­fied plan under section 401(a) unless it satisfies the requirements of section 411. Section 411(a)(2)(A), (B), and (C) of the Code provide vesting sched­ules, one of which must be satisfied in order to satisfy the requirements of section 411. In addition, the introduc­tory language of section 411(a) re­quires that an employee's right to a normal retirement benefit be nonfor­feitable upon attainment of normal retirement age. Section 411(a)(9) of the Code de­fines the term normal retirement benefit as the greater of the early re­tirement benefit or the benefit under the plan commencing at normal re­tirement age. Section 411(a)(7) of the Code de­fines accrued benefit in general as (1) in the case of a defined benefit plan, the benefit determined under the plan expressed as an annual benefit com­mencing at normal retirement age or (2) in the case of any other plan, the balance of the employee's account. For purposes of section 411 of the Code, the term normal retirement benefit means the individual's ac­crued benefit, determined without re­gard to whether such benefit is vested. Thus, for a plan to satisfy the requirements of section 411, an em­ployee participating in the plan at normal retirement age must have a nonforfeitable right to 100 percent of the employee's accrued benefit ir­respective of whether some portion of such accrued benefit would otherwise be forfeitable under the plan's vesting schedule. See Caterpillar Tractor Co. v. Commissioner , 72 T.C. 1088 (1979). HOLDING Because the plan in this case limits an employee's right to nonforfeitable benefits to amounts in which the em­ployee already has a nonforfeitable interest pursuant to the plan's vesting schedule, the plan does not satisfy the requirements of section 411 (a) of the Code. _____________________________________________________________________________________________________________________________________________________________________________________ The Tax Court has reached the same conclusion in interpreting a substantially identical counterpart provision in the Internal Revenue Code, 26 U.S.C. § 411(a) (1976). See Trustees of the Taxicab Industry Pension Fund v. Commissioner, 1981 T.C.M. (CCH) P 651; Board of Trustees of New York Hotel Trades Council & Hotel Association of New York City, Inc. Pension Fund v. Commissioner, 1981 T.C.M. (CCH) P 597; Caterpillar Tractor Co. v. Commissioner, 72 T.C. 1088 (1979) https://www.courtlistener.com/opinion/409644/clara-duchow-individually-and-as-administratrix-of-the-estate-of-herman/authorities/ https://www.upi.com/Archives/1983/05/02/The-Supreme-Court-refused-Monday-to-take-up-a/6200420696000/

eCFR :: 26 CFR 1.416-1 -- Questions and answers on top-heavy plans. T-21. Q. For purposes of testing whether an individual has compensation of more than $150,000, what definition of compensation must be used? A. The definition of compensation to be used is the definition in § 1.415(c)-2, however, compensation must be determined for a plan year, not a limitation year. Alternatively, compensation that would be stated on an employee's Form W-2, “Wage and Tax Statement,” for the calendar year that ends with or within the plan year may be used, although amounts that would have been stated on the employee's Form W-2 but for an election under section 125, 132(f)(4), 401(k), 403(b), 408(k), 408(p)(2)(A)(i), or 457(b) must be included. A plan must use the same definition of compensation for all top-heavy plan purposes for which the definition in this Q and A must be used. M-7 Q. What is the defined contribution minimum? A. The sum of the contributions and forfeitures allocated to the account of any non-key employee who is a participant in a top-heavy defined contribution plan must equal at least 3% of such employee's compensation (see Question and Answer T-21 for the definition of compensation) for that plan year or for the calendar year ending within the plan year. However, a lower minimum is permissible where the largest contribution made or required to be made for key employees is less than 3%.

If the other items refer to 415 amounts for deliberations, prima facie the 415(h) stipulation affects said deliberation. The 416 Treasury Regulations specifically cite to 415 amounts.

Please indicate if 415(h) affects coalescing amounts for:: HCE determination key employee determination 416 minimums 402(g) 409(o)(1)(C)(ii)

415(h) expands the 1563(a)(1) controlled group set of connected entities. This expansion perforce affects the reckoning of amounts for 415 compliance, both the annual additions and the 415(b)(1)(B) and 415(c)(1)(B) limits. The following excerpt serves as verification of this situation. Proceed forward for the inquiry. Pursuant to section 414(b) and § 1.414(b)-1, all employees of all corporations that are members of a controlled group of corporations (within the meaning of section 1563(a), as modified by section 1563(f)(5), and determined without regard to section 1563(a)(4) and (e)(3)(C)) are treated as employed by a single employer for purposes of section 415. Similarly, pursuant to section 414(c) and regulations promulgated under section 414(c), all employees of trades or businesses that are under common control are treated as employed by a single employer. Thus, any defined benefit plan or defined contribution plan maintained by any member of a controlled group of corporations (within the meaning of section 414(b)) or by any trade or business (whether or not incorporated) that is part of a group of trades or businesses that are under common control (within the meaning of section 414(c)) is deemed maintained by all such members or such trades or businesses. Pursuant to section 415(h), for purposes of section 415, sections 414(b) and 414(c) are applied by using the phrase “more than 50 percent” instead of the phrase “at least 80 percent” each place the latter phrase appears in section 1563(a)(1) and in the regulations under section 414(c) (except for purposes of determining whether two or more organizations are a brother-sister group of trades or businesses under common control under the rules in § 1.414(c)-2(c)). https://uscode.house.gov/view.xhtml?req=(title:26 section:415 edition:prelim) OR (granuleid:USC-prelim-title26-section415)&f=treesort&edition=prelim&num=0&jumpTo=true URL: https://www.ecfr.gov/current/title-26/part-1/section-1.415(a)-1#p-1.415(a)-1(f)(1) Citation: 26 CFR 1.415(a)-1(f)(1) https://pdfs.semanticscholar.org/b661/5ad7712857a69ffde057d6f233cdc94829ce.pdf Please indicate if 415(h) affects further amounts for scrutinizing compliance. Perhaps to discourage entities in a controlled group from scrambling or recalibrating ownership to provide more advantageous circumstances for compliance, 415(h) might apply further.

Please indicate if individuals who resume work may request to have the disbursements cease, or if the administrators may overrule this request.

§ 2530.203-3 Suspension of pension benefits upon employment. URL: https://www.ecfr.gov/current/title-29/section-2530.203-3 Citation: 29 CFR 2530.203-3 This section sets forth the circumstances and conditions under which such benefit payments may be suspended. A plan may provide for the suspension of pension benefits which commence prior to the attainment of normal retirement age, or for the suspension of that portion of pension benefits which exceeds the normal retirement benefit, or both, for any reemployment and without regard to the provisions of section 203(a)(3)(B) and this regulation to the extent (but only to the extent) that suspension of such benefits does not affect a retiree's entitlement to normal retirement benefits payable after attainment of normal retirement age, or the actuarial equivalent thereof. Retirement plans seem drafted to encourage distributions occur only under controlled circumstances. Therefore, individuals who resume employment would seem helpful, as these persons have established an alternate source of income. Therefore, allowing distributions to continue, if against the prerogative of these individuals, seems counterintuitive. To present an analogy, individuals who decide to reduce the sodium/salt intake of their diet, receiving as gifts saltshakers, which do contain salt. The individuals do not request and would prefer not to receive these saltshakers, yet the saltshakers still arrive containing salt.

Prior to USERRA, please describe the stipulations on veterans' reemployment conformity and the associated impact on vesting/benefit accrual. Please provide a diachronic survey.

Helpfully expound upon the restrictions for distributions of rollover amounts. Particularly, if rollover amounts remain subject to in-service distribution restrictions. The provenance of the rollover amounts perforce might affect the situation, if the rollovers proceeded from elective deferrals, Roth amounts, after-tax distributions, amongst perhaps further items.

Perhaps governmental plans lack the requirement to allow for five (5) consecutive periods of severance/year breaks in service to forfeit amounts where an extinguishing distribution of the accrued benefit or account balance has not occurred. Please provide helpful citations for this inquiry.

The guidance seems to indicate only employed participants may avail of hardship distributions, as the directing code section and treasury regulations seem to deliberately refer to "employees" in contrast to "participants".

This post's inquiry entails if § 416 minimum contributions routinely have § 404(a)(3) limits waived. https://www.irs.gov/pub/irs-tege/epche903.pdf

I inquire if hardship distributions may occur from rollover accounts and/or Roth rollover accounts. Also, I inquire if hardship distributions may proceed from discretionary contributions. § 401(k)(14): 26 USC 401: Qualified pension, profit-sharing, and stock bonus plans (house.gov) (14) Special rules relating to hardship withdrawals For purposes of paragraph (2)(B)(i)(IV)- (A) Amounts which may be withdrawn The following amounts may be distributed upon hardship of the employee: (i) Contributions to a profit-sharing or stock bonus plan to which section 402(e)(3) applies. (ii) Qualified nonelective contributions (as defined in subsection (m)(4)(C)). (iii) Qualified matching contributions described in paragraph (3)(D)(ii)(I). (iv) Earnings on any contributions described in clause (i), (ii), or (iii). § 402(e)(3) https://uscode.house.gov/view.xhtml?req=(title:26 section:402 edition:prelim) OR (granuleid:USC-prelim-title26-section402)&f=treesort&edition=prelim&num=0&jumpTo=true#substructure-location_e_3 (3) Cash or deferred arrangements For purposes of this title, contributions made by an employer on behalf of an employee to a trust which is a part of a qualified cash or deferred arrangement (as defined in section 401(k)(2)) or which is part of a salary reduction agreement under section 403(b) shall not be treated as distributed or made available to the employee nor as contributions made to the trust by the employee merely because the arrangement includes provisions under which the employee has an election whether the contribution will be made to the trust or received by the employee in cash.

If a plan terminates, and the plan had heretofore stipulated a concluding day of the plan year condition for eligibility for an allocation, and the effective date of the plan termination occurs prior to the hitherto calibrated end of the plan year, prima facie the last day of plan year employment eligibility condition resynchronizes to the effective date of plan termination. Please provide guidance on this situation.

Please helpfully provide citations, if helpful.

The freezing of a defined benefit plan perforce seems to affect the tallying of accrual service, and perhaps also the reckoning of the remuneration of which the accrued benefit serves as a function. Perhaps conversely, freezing the plan might not affect the reckoning of the high three year remuneration streak for § 415(b) deliberations. Please provide helpful guidance on this situation. Also, the reckoning of years of service and/or years of participation might remain unaffected. If guidance has resolved this situation, please provide in a reply.

The accompanying instructions to the Form 6088 seem to indicate collectively bargained defined benefit plans must file a Form 6088 along with a Form 5310 submission. While clearly collectively bargained defined contribution plans seem less expected to file a Form 6088, collectively bargained defined benefit plans seem to lack only the expectation to input information into g. Revenue Procedure 2021-4 seems to present confusion, as at a particular section, this guidance seems to waive the expectation to file a Form 6088 for all collectively bargained plans. Please provide further salient, affecting guidance.