Section 5. If — Publication 6165 — Defined Benefit Listing

employer in the adoption agreement, the frozen accrued benefit of each IRC 401(a)(17) participant in the fresh-start group will be adjusted in accordance with the following method:

IRC 401(a)(17) participants who are OBRA '93 IRC 401(a)(17) participants only:

(1) Determine the frozen accrued benefit of each OBRA '93 IRC 401(a)(17) participant as of the last day of the plan year beginning before January 1, 1994.

(2) Adjust the amount in step 1 by multiplying it by the following fraction (not less than 1). The numerator of the fraction is the average compensation of the OBRA '93 IRC 401(a)(17) employee determined for the current year (as limited by IRC 401(a)(17)), using the same definition and compensation formula in effect as of the last day of the last plan year beginning before January 1, 1994. The denominator of the fraction is the participant's average compensation for the last day of the last plan year beginning before January 1, 1994, using the definition and compensation formula in effect as of the last day of the last plan year beginning before January 1, 1994.

IRC 401(a)(17) participants who are both TRA '86 IRC 401(a)(17) participants and OBRA '93 IRC 401(a)(17) participants:

(1) Determine each TRA '86 IRC 401(a)(17) participant's frozen accrued benefit as of the last day of the last plan year beginning before January 1, 1989.

(2) Adjust the amount in step 1 up through the last day of the last plan year beginning before the first plan year beginning on or after January 1, 1994, by multiplying it by the following fraction (not less than 1). The numerator of the fraction is the TRA '86 IRC 401(a)(17) participant's average compensation determined for the current year (as limited by IRC 401(a)(17)), using the same definition and compensation formula in effect as of the last day of the last plan year beginning before January 1, 1989. The denominator of the fraction is the participant's average compensation for the last day of the plan year beginning before January 1, 1989, using the definition and compensation formula in effect last day of the last plan year beginning before January 1, 1989.

(3) Determine the TRA '86 IRC 401(a)(17) participant's frozen accrued benefit as of the

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last day of the last plan year beginning before January 1, 1994.

(4) Subtract the amount determined in step 2 from the amount determined in step 3.

(5) Adjust the amount in step 4 by multiplying it by the following fraction (not less than 1). The numerator of the fraction is the TRA '86 IRC 401(a)(17) participant's average compensation determined for the current year (as limited by IRC 401(a)(17)), using the same definition and compensation formula in effect as of the last day of the last plan year beginning before January 1, 1994. The denominator of the fraction is the participant's average compensation for the last day of the plan year beginning before January 1, 1994, using the definition and compensation formula in effect as of the last day of the last plan year beginning before January 1, 1994.

(6) Adjust the amount in step 1 by multiplying it by the following fraction (not less than 1). The numerator of the fraction is the TRA '86 IRC 401(a)(17) participant’s average compensation for the current year (as limited by IRC 401(a)(17)), using the same definition of compensation and compensation formula in effect as of the last day of the last plan year beginning before January 1, 1989. The denominator of the fraction is the participant's average compensation for the last day of the last plan year beginning before January 1, 1989, using the definition and compensation formula in effect as of the last day of the last plan year beginning before January 1, 1989.

Add the amounts determined in step 5, and the greater of steps 6 or 2.

Sample Adoption Agreement Language:

If, as of the latest fresh-start date, the plan contained a benefit formula under which the participant's accrued benefit could be determined with reference to compensation earned by the participant in years beginning after the latest fresh-start date occurring before the first plan year beginning on or after January 1, 1994 and elected by the employer below

( ) the provisions of sections 1.1 through 5 of _________ apply to adjust the frozen

accrued benefit of each participant in the fresh-start group determined as of the latest fresh-start date under the plan.

(Note to reviewer: Insert plan section that corresponds to this LRM #25.)

If elected by the employer below, each participant's frozen accrued benefit will be adjusted in accordance with the following fraction:

( ) Old compensation fraction

( ) New compensation fraction

( ) Reconstructed compensation fraction (may be selected only if the latest freshstart

date is before the first day of the first plan year beginning on or after January 1, 1994)

For purposes of calculating a participant's "reconstructed compensation," the selected year will be the plan year beginning in (the selected year must begin after the latest fresh-start date):

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( ) 1989

( ) 1990

( ) 1991

( ) 1992

( ) 1993

( ) 1994

( ) Alternative Adjustment

( ) Special Adjustment for IRC 401(a)(17) Participants