Existing Binding Contracts prior to September 13, 1995

(1) Section 4958 doesn’t apply to an excess benefit transaction occurring pursuant to

a written contract that was binding on September 13, 1995, and at all times thereafter before the transaction occurs. See P.L. 104-168, Section 1311(d)(2) and Treas. Reg. 53.4958-1(f)(2).

a. Termination or Cancellation - A written binding contract that is terminable or

subject to cancellation by the ATEO without the disqualified person’s consent and without substantial penalty to the organization, is no longer treated as a binding contract as of the earliest date that any such termination or cancellation, if made, would be effective. See Treas. Reg. 53.4958-1(f)(2).

b. Material Change - If a binding written contract is materially changed, it’s

treated as a new contract entered as of the material change effective date. See Treas. Reg. 53.4958-1(f)(2).

c. A "material change" includes an extension or renewal of the contract (except

for an extension or renewal resulting from the person contracting with the ATEO unilaterally exercising an option expressly granted by the contract), or a more than incidental change to the amount payable under the contract.

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