Cash Balance- 414(k)

[Randy Watson]

I submitted a determination letter application for a cash balance plan. The document had a 414(k) provision in it that basically says that if the plan ever permits employee contributions then the contributions will be treated as annual additions to a DC plan pursuant to Code Section 414(k). The IRS agent responds to the submission and claims that 414(k) accounts are not permitted in a DB plan and that I need to submit a new DL application if I want a ruling on that 414(k) provision.

Since when are 414(k) accounts not permitted in a DB plan? Isn't that the sole purpose of Code Section 414(k)? Also, why would I need to submit a new application for a 414(k) ruling when that does not appear to be something you need to specifically request a ruling on when you submit a 5300?

Am I missing something?

[mbozek]

I submitted a determination letter application for a cash balance plan. The document had a 414(k) provision in it that basically says that if the plan ever permits employee contributions then the contributions will be treated as annual additions to a DC plan pursuant to Code Section 414(k). The IRS agent responds to the submission and claims that 414(k) accounts are not permitted in a DB plan and that I need to submit a new DL application if I want a ruling on that 414(k) provision.

Since when are 414(k) accounts not permitted in a DB plan? Isn't that the sole purpose of Code Section 414(k)? Also, why would I need to submit a new application for a 414(k) ruling when that does not appear to be something you need to specifically request a ruling on when you submit a 5300?

Am I missing something?

414k "Certain Plans" states that the plan is a defined benefit plan which provides a benefit derived from employer contributions which is based partly on the balance of the separate account of the participant. Neither DC plans (414(i)) or DB plans (414(j)) are limited to employer contributions. While a 414(k) plan is a form of DB plan which provide benefits derived partly from a separate account it does not appear that employees can contribute to the separate account b/c a 414(k) plan is not a DC plan under 414(i).