103. Accrued benefit derived from mandatory employee contributions

Statement of Requirement: IRC 401(a)(4) and IRC 411(c)(2); Treas. Regs. 1.401(a)(4)-6 and 1.411(c)-1(c); Rev. Rul. 76-47, Rev. Rul. 78- 202; Rev Rul. 89-60

Document Provision: _____

(Note to reviewer: The following provisions are needed if the plan previously required (or is a Nonstandardized Plan that currently requires) mandatory employee contributions.)

(Note to reviewer: For purposes of determining the present value under IRC 417(e)(3) with respect to the portion of the accrued benefit derived from employee contributions that is computed in accordance with the rules of IRC 411(c)(2), the probability of death before the assumed commencement date may not be taken into account.)

Sample Plan Language:

The employee-provided benefit shall be computed as follows:

(1) STEP ONE - Determine the total amount of contributions made by a participant as a condition of participation in the plan and, where applicable, any prior plan;

(2) STEP TWO - Add to the amount in step one interest, if any, required by the terms of the prior plan to be paid on such contributions up to the ERISA compliance date;

(3) STEP THREE - Add to the sum of the amounts determined in steps one and two interest compounded annually at the rate of 5% from the ERISA compliance date or the date the participant began participation in the plan, whichever is later, to the end of the last plan year beginning before January 1, 1988, or the participant's normal retirement age, whichever is earlier.

171 | Defined Benefit Plan LRM Package 06/2026

(4) STEP FOUR - Add to the sum of the amounts determined in steps one, two and three interest compounded annually (I) at the rate of 120% of the Federal mid-term rate (as in effect under IRC 1274 for the first month of the plan year) from the beginning of the first plan year beginning after December 31, 1987, and ending with the date on which the determination is being made, and

(II) at the interest rate which would be used under the plan under IRC 417(e)(3) (as of the determination date) for the period beginning with the determination date and ending on the date on which the employee attains normal retirement age.

(5) STEP FIVE - The amount in step four will be converted into the normal form of benefit using the interest rate that would be used under the plan under IRC 417(e)(3).

The employer-provided accrued benefit in all years shall equal the excess, if any, of the accrued benefit over the employee-provided accrued benefit. A participant shall be 100% vested in his or her employee-provided accrued benefit.

(Note to reviewer: Under Rev. Proc. 2000-20, a predecessor to Rev. Proc. 2023-37, a Pre- approved defined benefit plan was permitted to accept mandatory employee contributions, if the plan provided the minimum benefit described in Treas. Reg. 1.401(a)(4)-6(b)(3)(ii). The following paragraph satisfies that requirement.)

With respect to benefits accrued during plan years beginning after December 31, , each participant's benefit under this plan shall not be less than the sum of (a) the accrued benefit calculated in accordance with steps one through five above with respect to contributions made by a participant during plan years beginning after December 31,, and (b) 50% of the total benefit accrued in plan years beginning after December 31,_____.

(Note to reviewer: The blanks should be filled in with a year no later than 1994.)

Where the terms of the plan, or prior plan, at any time required that an employee make contributions to it in order to be a participant, and the plan or prior plan has been amended so as to no longer require such contributions, the participant's employee-provided accrued benefit and employer-provided accrued benefit shall be determined as if the plan required contributions of the employee as a condition of participation at the time of termination of employment. This section, however, shall not apply to the extent the contributions the participant has made to the plan (or prior plan) have been refunded to him or her.

(Note to reviewer: Plans that ceased mandatory employee contributions for plan years beginning after the year provided by the sponsor above, may treat all benefits under the plan as employer-provided under Treas. Reg. 1.401(a)(4)-6(b)(5).)