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414(x) SPECIAL RULES FOR ELIGIBLE
COMBINED DEFINED BENEFIT PLANS AND QUALIFIED CASH OR DEFERRED
ARRANGEMENTS.
414(x)(1) GENERAL RULE. Except
as provided in this subsection, the requirements of this title shall
be applied to any defined benefit plan or applicable defined
contribution plan which are part of an eligible combined plan in the
same manner as if each such plan were not a part of the eligible
combined plan.
414(x)(2)
ELIGIBLE COMBINED PLAN. For purposes of this subsection
414(x)(2) ELIGIBLE COMBINED
PLAN. For purposes of this subsection
414(x)(2)(A) IN GENERAL. The
term “eligible combined plan” means a plan
414(x)(2)(A)(i) which is
maintained by an employer which, at the time the plan is
established, is a small employer,
414(x)(2)(A)(ii) which consists
of a defined benefit plan and an applicable defined contribution
plan,
414(x)(2)(A)(iii) the assets of
which are held in a single trust forming part of the plan and are
clearly identified and allocated to the defined benefit plan and the
applicable defined contribution plan to the extent necessary for the
separate application of this title under paragraph (1), and
414(x)(2)(A)(iv) with respect to
which the benefit, contribution, vesting, and nondiscrimination
requirements of subparagraphs (B), (C), (D), (E), and (F) are met.
For purposes of this
subparagraph, the term “small employer” has the meaning given such
term by section 4980D(d)(2), except that such section shall be
applied by substituting “500” for “50” each place it appears.
414(x)(2)(B) BENEFIT
REQUIREMENTS.
414(x)(2)(B)(i) IN GENERAL. The
benefit requirements of this subparagraph are met with respect to
the defined benefit plan forming part of the eligible combined plan
if the accrued benefit of each participant derived from employer
contributions, when expressed as an annual retirement benefit, is
not less than the applicable percentage of the participant's final
average pay. For purposes of this clause, final average pay shall be
determined using the period of consecutive years (not exceeding 5)
during which the participant had the greatest aggregate compensation
from the employer.
414(x)(2)(B)(ii) APPLICABLE
PERCENTAGE. For purposes of clause (i), the applicable percentage is
the lesser of
414(x)(2)(B)(ii)(I) 1 percent
multiplied by the number of years of service with the employer, or
414(x)(2)(B)(ii)(II) 20 percent.
414(x)(2)(B)(iii) SPECIAL RULE
FOR APPLICABLE DEFINED BENEFIT PLANS. If the defined benefit plan
under clause (i) is an applicable defined benefit plan as defined in
section 411(a)(13)(B) which meets the interest credit requirements
of section 411(b)(5)(B)(i), the plan shall be treated as meeting the
requirements of clause (i) with respect to any plan year if each
participant receives a pay credit for the year which is not less
than the percentage of compensation determined in accordance with
the following table:
If the participant's age as of
the beginning of the year
is
percentage
30 or less
.
2
Over 30 but less than 40
4
40 or over but less than 50
6
50 or over
8
414(x)(2)(B)(iv) YEARS OF
SERVICE. For purposes of this subparagraph, years of service shall
be determined under the rules of paragraphs (4), (5), and (6) of
section 411(a), except that the plan may not disregard any year of
service because of a participant making, or failing to make, any
elective deferral with respect to the qualified cash or deferred
arrangement to which subparagraph (C) applies.
414(x)(2)(C) CONTRIBUTION
REQUIREMENTS.
414(x)(2)(C)(i) IN GENERAL. The
contribution requirements of this subparagraph with respect to any
applicable defined contribution plan forming part of an eligible
combined plan are met if
414(x)(2)(C)(i)(I) the qualified
cash or deferred arrangement included in such plan constitutes an
automatic contribution arrangement, and
414(x)(2)(C)(i)(II) the employer
is required to make matching contributions on behalf of each
employee eligible to participate in the arrangement in an amount
equal to 50 percent of the elective contributions of the employee to
the extent such elective contributions do not exceed 4 percent of
compensation.
Rules similar to the rules of
clauses (ii) and (iii) of section 401(k)(12)(B) shall apply for
purposes of this clause.
414(x)(2)(C)(ii) NONELECTIVE
CONTRIBUTIONS. An applicable defined contribution plan shall not be
treated as failing to meet the requirements of clause (i) because
the employer makes nonelective contributions under the plan but such
contributions shall not be taken into account in determining whether
the requirements of clause (i)(II) are met.
414(x)(2)(D) VESTING
REQUIREMENTS. The vesting requirements of this subparagraph are met
if
414(x)(2)(D)(i) in the case of a
defined benefit plan forming part of an eligible combined plan an
employee who has completed at least 3 years of service has a
nonforfeitable right to 100 percent of the employee's accrued
benefit under the plan derived from employer contributions, and
414(x)(2)(D)(ii) in the case of
an applicable defined contribution plan forming part of eligible
combined plan
414(x)(2)(D)(ii)(I) an employee
has a nonforfeitable right to any matching contribution made under
the qualified cash or deferred arrangement included in such plan by
an employer with respect to any elective contribution, including
matching contributions in excess of the contributions required under
subparagraph (C)(i)(II), and
414(x)(2)(D)(ii)(II) an employee
who has completed at least 3 years of service has a nonforfeitable
right to 100 percent of the employee's accrued benefit derived under
the arrangement from nonelective contributions of the employer.
For purposes of this
subparagraph, the rules of section 411 shall apply to the extent not
inconsistent with this subparagraph.
414(x)(2)(E) UNIFORM PROVISION
OF CONTRIBUTIONS AND BENEFITS. In the case of a defined benefit plan
or applicable defined contribution plan forming part of an eligible
combined plan, the requirements of this subparagraph are met if all
contributions and benefits under each such plan, and all rights and
features under each such plan, must be provided uniformly to all
participants.
414(x)(2)(F) REQUIREMENTS MUST
BE MET WITHOUT TAKING INTO ACCOUNT SOCIAL SECURITY AND SIMILAR
CONTRIBUTIONS AND BENEFITS OR OTHER PLANS.
414(x)(2)(F)(i) IN GENERAL. The
requirements of this subparagraph are met if the requirements of
clauses (ii) and (iii) are met.
414(x)(2)(F)(ii) SOCIAL SECURITY
AND SIMILAR CONTRIBUTIONS. The requirements of this clause are met
if
414(x)(2)(F)(ii)(I) the
requirements of subparagraphs (B) and (C) are met without regard to
section 401(l), and
414(x)(2)(F)(ii)(II) the
requirements of sections 401(a)(4) and 410(b) are met with respect
to both the applicable defined contribution plan and defined benefit
plan forming part of an eligible combined plan without regard to
section 401(l).
414(x)(2)(F)(iii) OTHER PLANS
AND ARRANGEMENTS. The requirements of this clause are met if the
applicable defined contribution plan and defined benefit plan
forming part of an eligible combined plan meet the requirements of
sections 401(a)(4) and 410(b) without being combined with any other
plan.
 414(x)(3)
NONDISCRIMINATION REQUIREMENTS FOR QUALIFIED CASH OR DEFERRED
ARRANGEMENT.
414(x)(3) NONDISCRIMINATION
REQUIREMENTS FOR QUALIFIED CASH OR DEFERRED ARRANGEMENT.
414(x)(3)(A) IN GENERAL. A
qualified cash or deferred arrangement which is included in an
applicable defined contribution plan forming part of an eligible
combined plan shall be treated as meeting the requirements of
section 401(k)(3)(A)(ii) if the requirements of paragraph (2)(C) are
met with respect to such arrangement.
414(x)(3)(B) MATCHING
CONTRIBUTIONS. In applying section 401(m)(11) to any matching
contribution with respect to a contribution to which paragraph
(2)(C) applies, the contribution requirement of paragraph (2)(C) and
the notice requirements of paragraph (5)(B) shall be substituted for
the requirements otherwise applicable under clauses (i) and (ii) of
section 401(m)(11)(A).
414(x)(4) SATISFACTION OF TOP-HEAVY RULES. A defined benefit plan
and applicable defined contribution plan forming part of an eligible
combined plan for any plan year shall be treated as meeting the
requirements of section 416 for the plan year.
414(x)(5)
AUTOMATIC CONTRIBUTION ARRANGEMENT
414(x)(5) AUTOMATIC CONTRIBUTION
ARRANGEMENT. For purposes of this subsection
414(x)(5)(A) IN GENERAL. A
qualified cash or deferred arrangement shall be treated as an
automatic contribution arrangement if the arrangement
414(x)(5)(A)(i) provides that
each employee eligible to participate in the arrangement is treated
as having elected to have the employer make elective contributions
in an amount equal to 4 percent of the employee's compensation
unless the employee specifically elects not to have such
contributions made or to have such contributions made at a different
rate, and
414(x)(5)(A)(ii) meets the
notice requirements under subparagraph (B).
414(x)(5)(B) NOTICE
REQUIREMENTS.
414(x)(5)(B)(i) IN GENERAL. The
requirements of this subparagraph are met if the requirements of
clauses (ii) and (iii) are met.
414(x)(5)(B)(ii) REASONABLE
PERIOD TO MAKE ELECTION. The requirements of this clause are met if
each employee to whom subparagraph (A)(i) applies
414(x)(5)(B)(ii)(I) receives a
notice explaining the employee's right under the arrangement to
elect not to have elective contributions made on the employee's
behalf or to have the contributions made at a different rate, and
414(x)(5)(B)(ii)(II) has a
reasonable period of time after receipt of such notice and before
the first elective contribution is made to make such election.
414(x)(5)(B)(iii) ANNUAL NOTICE
OF RIGHTS AND OBLIGATIONS. The requirements of this clause are met
if each employee eligible to participate in the arrangement is,
within a reasonable period before any year, given notice of the
employee's rights and obligations under the arrangement.
The requirements of clauses (i)
and (ii) of section 401(k)(12)(D) shall be met with respect to the
notices described in clauses (ii) and (iii) of this subparagraph.
414(x)(6) COORDINATION WITH OTHER REQUIREMENTS.
414(x)(6)(A) TREATMENT OF
SEPARATE PLANS. Section 414(k) shall not apply to an eligible
combined plan.
414(x)(6)(B) REPORTING. An
eligible combined plan shall be treated as a single plan for
purposes of sections 6058 and 6059.
414(x)(7) APPLICABLE DEFINED
CONTRIBUTION PLAN. For purposes of this subsection
414(x)(7)(A) IN GENERAL. The
term “applicable defined contribution plan” means a defined
contribution plan which includes a qualified cash or deferred
arrangement.
414(x)(7)(B) QUALIFIED CASH OR
DEFERRED ARRANGEMENT. The term “qualified cash or deferred
arrangement” has the meaning given such term by section 401(k)(2).
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