70. Diversification Requirements — 0325 Publ 6088 (PDF)

Statement of Requirement: Code § 401(a)(35); Reg. § 1.401(a)(35)-1; Notice 2011-19, 2011-11 I.R.B. 550

(Note to reviewer: This Article is not required for the following plans: (1) a plan sponsored by a non-stock corporation; (2) a plan which does not provide for any investments in securities; (3) a plan which does provide for investments in securities, but only if these securities are held indirectly as part of a broader fund that is a regulated investment company described in Code § 851(a), a common or collective trust fund or pooled investment fund maintained by a bank or trust company supervised by a State or a Federal agency, a pooled investment fund of an insurance company that is qualified to do business in a State, or an investment fund managed by an investment manager within the meaning of § 3(38) of ERISA for a multiemployer plan, all as further described in Regulations § 1.401(a)(35)- 1(f)(2)(iv)(B)(3)(ii); (4) a plan which is a one-participant retirement plan as defined in Code § 401(a)(35)(E)(iv); and (5) a plan that is an employee stock ownership plan (ESOP) that is a separate plan for purposes of Code § 414(l) with respect to any other defined benefit plan or defined contribution plan maintained by the same employer or employers and holds no contributions or earnings thereunder that are (or were ever) subject to Code § 401(k) or 401(m). A plan, however, is not considered to hold amounts ever subject to Code § 401(k) or 401(m) if the amounts attributable to a rollover (held in a separate account) were previously subject to Code § 401(k) or 401(m).

This Article is required in all other Pre-approved Plans which do not meet these criteria. See also ESOP LRM #5, Diversification Rights of Qualified Participants.)

Sample Plan Language:

Article _____. Diversification Requirements for Elective Deferrals, Employee Contributions, and Employer Nonelective Contributions Invested in Employer Securities

(___) The diversification requirements of Code section 401(a)(35) do not apply because the plan does not allow investment in employer securities.

(Note to reviewer: Select this option if this section does not apply because the plan does not allow investment in employer stock. If selected, the remainder of this DC LRM #70 does not need to be included in the plan.)

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