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Pension and Employee Benefits: Code, ERISA, & Regulations
This series provides an authoritative and comprehensive reference to the full text of benefits-related provisions of the Internal Revenue Code, the full text of ERISA, and related proposed and final regulations, as well as the official IRS and DOL preambles, and Committee Reports.
The IRS has issued IRS Notice 2009-71 requesting comments on guidance that it plans to issue relating to eligible combined plans under Code Sec. 414(x). An eligible combined plan (also referred to as a DB-K plan) provides a vehicle through which an employer can maintain both a defined benefit plan and a defined contribution plan (which may include a 401(k) plan) on a combined basis, thus reducing the administrative burden and cost of maintaining separate plans.
Code Sec. 414(x), which establishes DB-K plans, was added by the Pension Protection Act of 2006 (P.L. 109-280) and was amended by the Worker, Retiree, and Employer Recovery Act of 2008 (P.L. 110-458). A DB-K plan must be sponsored by a small employer with at least two employees and no more than 500 employees and must meet certain benefit, contribution, vesting, and nondiscrimination requirements. The defined benefit plan portion must provide a minimum benefit equal to the lesser of 1% of final average pay times years of service or 20% of final average pay. The defined contribution plan portion must utilize a qualified cash or deferred arrangement that contains a 4% of pay automatic contribution arrangement. The basic match contribution, under Code Sec. 414(x)(2)(C)(i)(II), is 50% of a participant's elective deferrals up to a maximum of 4% of pay.
The DB-K plan rules under Code Sec. 414(x) are effective for plan years beginning after December 31, 2009. The upcoming guidance under consideration in the IRS notice would be prospective. Written comments regarding possible issues to be addressed in guidance under Code Sec. 414(x) should be submitted by October 15, 2009.
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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