SECTION 7. ADDITIONAL

REQUIREMENTS FOR PAIRED PLANS

.01 Limits of § 415(e) Must Be Provided in Defined Benefit Plan Only - For limitation years beginning before January 1, 2000, the benefits under a defined benefit plan in a combination of paired plans must be limited by the requirements of § 415(e), relating to the aggregation of defined benefit and defined contribution plans. Adjustments to satisfy the requirements of § 415(e) may only be provided in the defined benefit plan with respect to benefits thereunder.

.02 Section 416(h) Adjustment to § 415(e) Limits - For limitation years beginning before January 1, 2000, paired plans that include a defined benefit plan must compute the denominators of defined benefit and defined contribution

fractions in a manner satisfying § 416(h)(1) unless the requirements of § 416(h)(2) (each as in effect for limitation years beginning before January 1, 2000) are satisfied. Paired plans providing the unreduced § 415(e) limits must provide, regardless of how the adoption agreement is completed, the additional top-heavy minimums described in § 416(h)(2)(A) and provide that the unreduced § 415(e) limits will not apply if the plan is super top-heavy as described in Question T-33 of § 1.416–1. In testing for super topheavy, all the requirements of questions T-35 and T-36 of § 1.416–1 must be included in the plan.

.03 Coordination of Minimum Benefits and Contributions Under Top-Heavy Plans / Uniformity Requirements - Because paired plans are standardized plans that must continue to satisfy the uniform benefit or allocation formula requirements of § 1.401(a)(4)–2 and –3 when the plans are top-heavy, the plans must include provisions that comply with one of the following options:

1 each of the paired plans must provide the top-heavy minimum contribution or benefit (as applicable) without regard to whether a participant is covered under the other paired plan(s); or

2 any participant who benefits under any one of the paired plans must automatically benefit under the other paired plan(s). If the second option is used, either each of the paired plans must provide the topheavy minimum contribution or benefit (as applicable) or the paired plans may designate one of the plans to provide the top-heavy minimum contribution or benefit. That is, either the defined benefit plan must provide a 2% minimum benefit or the defined contribution plan must provide a 5% minimum contribution, or both plans may provide the top-heavy minimum. Also, if the second option is used and one of the paired plans has been designated to provide the top-heavy minimums, the plans must further provide that in the event the identical employees do not benefit under each paired plan, the plans will default to the first option (i.e., each plan provides the top-heavy minimum). In years beginning before January 1, 2000, if the unreduced § 415(e) limit is used, the 2% minimum benefit and the 5% minimum contribution are increased

to 3% and 7 1/2%, respectively. If the paired plans designate one of the plans to provide the top-heavy minimum contribution or benefit, then, in the event of the termination of such plan, the remaining plan must provide the top-heavy minimum.

.04 Satisfaction of Safe Harbor Contribution Requirement in Paired Defined Contribution Plans that Include a § 401(k) Safe Harbor - In the case of paired defined contribution plans, if one of the plans uses the safe harbor method in § 401(k)(12) (for plan years beginning after December 31, 1998), the safe harbor contribution requirement must be satisfied using one of the following options. First, the paired plans may provide that the safe harbor contributions will be made under the plan that includes the CODA. Second, the paired plans may provide that the safe harbor contributions will be made under the other plan. However, the paired plans may provide for the latter option only if the terms of the paired plans will automatically satisfy the requirements of sections IX. and XI. of Notice 98–52, as modified by Notice 2000–3. If the paired plans provide that the safe harbor contributions will be made under the plan that does not include the CODA, then, in the event of the termination of such plan, the plan that includes the CODA must provide the safe harbor contributions.

.05 Pairing Provisions Must be in the Basic Plan Document - In the case of paired plans, all provisions necessary to coordinate the plans (other than the reliance statement required under section 5.13) must be set forth in the basic plan document and not in the adoption agreement. Paired plans may allow the employer to elect in the adoption agreement which of the two options described in subsection .03 and which of the two options described in subsection .04, if applicable, will apply to the employer’s plans.

.06 Paired Plans Limited to Two Different Basic Plan Documents - While the sponsor is not limited in the number of sets of paired plans it may adopt, each set must be limited to two different basic plan documents: one for defined benefit plans and one for defined contribution plans. The pairing of defined contribution plans requires only one basic plan document such as a profit-sharing plan and a money

February 7, 2000 562 2000–6 I.R.B.

purchase plan containing the identical basic plan document and two different adoption agreements. A sponsor may provide a pairing of defined benefit and defined contribution plans in such a manner that with two different basic plan documents and three adoption agreements, an adopting employer may adopt a profitsharing plan, a money purchase plan, and a defined benefit plan.