27. Current — Publication 6165 — Defined Benefit Listing

Statement of Requirement: IRC 401(a)(4), 401(a)(5), 401(l), 411(b)(1); Treas Regs. 1.401(a)(4)-3, 1.401(l)-1, 1.401(l)-3

Document Provision: _____

Sample Adoption Agreement Language:

EXCESS BENEFIT PLANS

A. Subject to the overall permitted disparity limit below, the current benefit formula under the plan will provide a benefit payable at normal retirement age equal to:

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(1) ( ) Unit credit:

The sum of (a) and (b) below:

(a) (i) ___% (base benefit percentage) times average annual compensation up to the integration level times each year of credited service plus a benefit equal to _____% (excess benefit percentage – not to exceed the base benefit percentage by more than the maximum excess allowance) times average annual compensation in excess of the integration level times each year of credited service. The maximum number of years of credited service during which permitted disparity is taken into account under this paragraph will be _____ (may not exceed 35, and, if benefits after the latest fresh-start date are determined under the fractional accrual rule in section _____ of the plan or the plan satisfies IRC 411(b)(1)(F), may not be less than 25).

(Note to reviewer: The last blank above should be filled in with the plan section that corresponds to the fractional accrual rule in LRM #31.)

(ii) The number of years of credited service taken into account under paragraph (a) (i) for any participant will not exceed the participant’s cumulative permitted disparity limit. The participant’s cumulative permitted disparity limit is equal to 35 minus the number of years credited to the participant for purposes of the benefit formula or the accrual method under the plan under one or more qualified plans or simplified employee pensions (whether or not terminated) ever maintained by the employer, other than years for which a participant earned a year of credited service under the benefit formula in paragraph (a)(i). For purposes of determining the participant’s cumulative permitted disparity limit, all years ending in the same calendar year are treated as the same year. If the participant’s cumulative permitted disparity limit is less than the period of years specified in paragraph (a)(i), then for years after the participant reaches the cumulative permitted disparity limit and through the end of the period specified in paragraph (a)(i), the participant’s benefit will be equal to the excess benefit percentage, or, if the participant’s benefit after the latest fresh-start date is not accrued under the fractional accrual rule and the plan does not satisfy IRC 411(b)(1)(F), 133 1/3% of the base benefit percentage, if lesser, times average annual compensation.

(b) _______% (not to exceed the lesser of: (1) the excess benefit percentage, and (2) 133 1/3% of the base benefit percentage, times average annual compensation for each year of credited service after the number of years of credited service taken into account in paragraph (a). If, however, benefits after the latest freshstart date are accrued under the fractional accrual rule or the plan satisfies IRC 411(b)(1)(F), then for each year of credited service after the years of credited service taken into account in paragraph (a), this percentage will be equal to the excess benefit percentage. The maximum number of years of credited service taken into account under this paragraph (b) will be ____ (if benefits after the latest fresh-start date are accrued under the fractional accrual rule or the plan satisfies IRC 411(b)(1)(F), the number of years entered must be no less than 35 minus the number of years of credited service taken into account in

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paragraph (a)).

For purposes of the preceding paragraph(s), the maximum excess allowance is, with respect to benefits under the plan for any year of credited service, the lesser of (1) the base benefit percentage or (2) the applicable factor determined from Table I or II in section B below.

If a participant begins receiving benefits at an age other than normal retirement age, the participant’s benefit will be determined in accordance with section _____ of the plan.

(Note to reviewer: The blank in the previous sentence should be filled in with the section number of the plan that corresponds to LRM #27B.)

Overall permitted disparity limit: For any plan year this plan benefits any participant who benefits under another qualified plan or simplified employee pension maintained by the employer that provides for permitted disparity (or imputes permitted disparity), the benefit for each participant under this plan will be equal to the base benefit percentage times the participant’s average annual compensation. If this paragraph is applicable, this plan will have a fresh-start date on the last day of the plan year preceding the plan year in which this paragraph is first applicable. In addition, if in any subsequent plan year this plan no longer benefits any participant who also benefits under another qualified plan or simplified employee pension maintained by the employer that provides for permitted disparity (or imputes permitted disparity), this plan will have a fresh-start date on the last day of the plan year preceding the plan year in which this paragraph is no longer applicable. For purposes of determining the participant’s overall permitted disparity limit, all years ending in the same calendar year are treated as the same year.

(2) ( ) Flat benefit

____% (base benefit percentage) times average annual compensation up to the integration level plus a benefit equal to _____% (excess benefit percentage – not to exceed the base benefit percentage by more than the maximum excess allowance) times average annual compensation in excess of the integration level for the plan year. For purposes of the preceding paragraph(s), the maximum excess allowance is equal to the lesser of: (1) the base benefit percentage or (2) the applicable factor determined from Table I or II in section B below, multiplied by 35.

If a participant begins receiving benefits at an age other than normal retirement age, the participant’s benefit will be determined in accordance with section _____ of the plan.

(Note to reviewer: The blank in the preceding paragraph should be filled in with the plan section number that corresponds to LRM #27B.)

For participants who are projected to have earned less than 35 years of credited service under this plan as of the end of the plan year in which they attain normal retirement age (or current age, if later), the base benefit percentage and the excess benefit percentage will be reduced by multiplying them by a fraction, the numerator of which is the number of years of credited service the participant is projected to have earned under this plan as of the end of the plan year in which the participant attains normal retirement age (or current age, if later), and the denominator of which is 35.

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Cumulative permitted disparity adjustment: If the number of the participant’s cumulative permitted disparity years exceeds 35, the participant’s benefit will be further adjusted as provided below. A participant’s cumulative disparity years consist of the sum of: (1) the total years of credited service a participant is projected to have earned under this plan by the end of the plan year containing the participant’s normal retirement age, and subsequent years of credited service, if any, (the total not to exceed 35), and (2) the number of years credited to the participant for purposes of the benefit formula or the accrual method under the plan under one or more other qualified plans or simplified employee pensions (whether or not terminated) ever maintained by the employer (other than years counted in (1)), and not including any years credited to the participant under such other qualified plans or simplified employee pensions after the participant has earned 35 years of credited service under this plan). For purposes of determining the participant’s cumulative permitted disparity limit, all years ending in the same calendar year are treated as the same year.

If this cumulative disparity adjustment is applicable, the participant’s benefit will be increased as follows:

(A) Subtract the participant’s base benefit percentage from the participant’s excess benefit percentage (after modification in accordance with the paragraphs preceding this cumulative disparity adjustment).

(B) Divide the result in (A) by the participant’s years of credited service under the plan projected to the later of normal retirement age or current age, not to exceed 35 years of credited service.

(D) Add the result in (C) to the participant’s base benefit percentage determined prior to this cumulative disparity adjustment.

Overall permitted disparity limit: For any plan year this plan benefits any participant who benefits under another qualified plan or simplified employee pension maintained by the employer that provides for permitted disparity (or imputes permitted disparity), the benefit for each participant under this plan will be equal to the base benefit percentage times the participant’s average annual compensation. For participants who are projected to have earned less than 35 years of credited service under this plan as of the end of the plan year in which they attain normal retirement age, (or current age, if later), the percentage in the preceding sentence will be multiplied by a fraction (not more than one), the numerator of which is the number of the participant’s years of credited service the participant is projected to have earned under this plan as of the end of the plan year in which the participant attains normal retirement age (or current age, if later), and the denominator of which is 35. If this paragraph is applicable, this plan will have a fresh-start date on the last day of the plan year preceding the plan year in which this paragraph is first applicable. In addition, if in any subsequent plan year this plan no longer benefits any participant who also benefits under another qualified plan or simplified employee pension maintained by the employer that provides for permitted disparity (or imputes permitted disparity), this plan will have a

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fresh-start date on the last day of the plan year preceding the plan year in which this paragraph is no longer applicable. For purposes of determining the participant’s overall permitted disparity limit, all years ending in the same calendar year are treated as the same year.

OFFSET PLANS

(4) ( ) Unit benefit:

The sum of (a) and (b) below:

(a) (i) ____% (gross benefit percentage) times average annual compensation for the plan year times each year of credited service offset by _______% (offset percentage – not to exceed the maximum offset allowance) times final average annual compensation up to the offset level times each year of credited service. The offset percentage for any participant shall not exceed one-half of the gross benefit percentage, multiplied by a fraction (not to exceed one), the numerator of which is the participant’s average annual compensation, and the denominator of which is the participant’s final average compensation up to the offset level. The maximum number of years of credited service taken into account under this paragraph will be ____ (may not exceed 35, and, if benefits after the latest freshstart date are determined under the fractional accrual rule in section _____ of the plan or the plan satisfies IRC 411(b)(1)(F), may not be less than 25).

(ii) The number of years of credited service taken into account under paragraph (a) (i) for any participant may not exceed the participant’s cumulative permitted disparity limit. The participant’s cumulative permitted disparity limit is equal to 35 minus the number of years credited to the participant for purposes of the benefit formula or the accrual method under the plan under one or more qualified plans or simplified employee pensions (whether or not terminated) ever maintained by the employer, other than years for which a participant earned a year of credited service under the benefit formula in paragraph (a)(i). For purposes of determining the participant’s cumulative permitted disparity limit, all years ending in the same calendar year are treated as the same year. If the participant’s cumulative disparity limit is less than the period of years specified in paragraph (a)(i), then for years after the participant reaches the cumulative permitted disparity limit and through the end of the period specified in paragraph (a)(i), the participant’s benefit will be equal to the gross benefit percentage, or, if the participant’s benefit after the latest fresh-start date is not accrued under the fractional accrual rule and the plan does not satisfy IRC 411(b)(1)(F), 133 1/3% of the gross benefit percentage reduced by the offset percentage, if lesser, times average annual compensation.

(b) _____% (not to exceed the lesser of: (1) the gross benefit percentage, and (2) 133 1/3% of the gross benefit percentage reduced by the offset percentage, times average annual compensation for each year of credited service after the number of years of credited service taken into account in paragraph (a). If, however, benefits after the latest fresh-start date are accrued under the fractional accrual rule or the plan satisfies IRC 411(b)(1)(F), then for each year of credited

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service after the years of credited service taken into account in paragraph (a), this percentage will be equal to the gross benefit percentage. The maximum number of years of credited service taken into account under this paragraph (b) will be _____ (if benefits after the latest fresh-start date are accrued under the fractional accrual rule or the plan satisfies IRC 411(b)(1)(F), the number of years entered must be no less than 35 minus the number of years of credited service taken into account in paragraph (a)).

For purposes of the preceding paragraph(s), the maximum offset allowance will not exceed the lesser of (1) the applicable factor from Table I or II in section B below, and (2) one-half of the gross benefit percentage.

If a participant begins receiving benefits at an age other than normal retirement age, the participant’s benefit will be determined in accordance with section _____ of the plan.

(Note to reviewer: The blank in the previous sentence should be filled in with the section number of the plan that corresponds to LRM #27B.)

Overall permitted disparity limit: For any plan year this plan benefits any participant who benefits under another qualified plan or simplified employee pension maintained by the employer that provides for permitted disparity (or imputes permitted disparity), the benefit for all participants under this plan will be equal to the gross benefit percentage minus the offset percentage, times the participant’s total average annual compensation. If this paragraph is applicable, this plan will have a fresh-start date on the last day of the plan year preceding the plan year in which this paragraph is first applicable. In addition, if in any subsequent plan year this plan no longer benefits any participant who also benefits under another qualified plan or simplified employee pension maintained by the employer that provides for permitted disparity (or imputes permitted disparity), this plan will have a fresh-start date on the last day of the plan year preceding the plan year in which this paragraph is no longer applicable. For purposes of determining the participant’s overall permitted disparity limit, all years ending in the same calendar year are treated as the same year.

(5) ( ) Flat Benefit

_____% (gross benefit percentage) times average annual compensation offset by _____% (offset percentage – not to exceed the maximum offset allowance) times final average compensation up to the offset level. The offset percentage for any participant shall not exceed one-half of the gross benefit percentage, multiplied by a fraction (not to exceed one), the numerator of which is the participant’s average annual compensation, and the denominator of which is the participant’s final average compensation up to the offset level.

The maximum offset allowance will not exceed the lesser of (1) the applicable factor from Table I or II in section B. below, multiplied by 35, and (2) one-half of the gross benefit percentage.

If a participant begins receiving benefits at an age other than normal retirement age,

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the participant’s benefit will be determined in accordance with section _____ of the plan.

(Note to reviewer: The blank in the preceding paragraph should be filled in with the plan section number which corresponds to LRM #27B.)

For participants who are projected to have earned less than 35 years of credited service under this plan as of the end of the plan year in which they attain normal retirement age (or the current age, if later), both the gross benefit percentage and the offset percentage will be reduced by multiplying them by a fraction, the numerator of which is the number of years of credited service the participant is projected to have earned under this plan as of the end of the plan year in which the participant attains normal retirement age (or the current age, if later), and the denominator of which is 35.

Cumulative permitted disparity adjustment: If the number of the participant’s cumulative permitted disparity years exceeds 35, the offset percentage will be further adjusted as provided below. A participants cumulative disparity years consist of the sum of: (1) the total years of credited service a participant is projected to have earned under this plan by the end of the plan year containing the participant’s normal retirement age and subsequent years of credited service, if any, (the total not to exceed 35), and (2) the number of years credited to the participant for purposes of the benefit formula or the accrual method under the plan under one or more other qualified plans or simplified employee pensions maintained by the employer (other than years counted in (1), and not including any years credited to the participant under such other qualified plans or simplified employee pension after the participant has earned 35 years of credited service under this plan). For purposes of determining the participant’s cumulative permitted disparity limit, all years ending in the same calendar year are treated as the same year.

If this cumulative disparity adjustment is applicable, the offset percentage will be further adjusted as follows:

(A) Divide the offset percentage (after modification in accordance with the paragraphs preceding this cumulative disparity adjustment) by the participant’s years of credited service under this plan projected to the later of normal retirement age or current age, not to exceed 35 years of credited service.

(B) Multiply the result in (A) by the number of years by which the participant’s cumulative disparity years exceed 35.

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earned less than 35 years of credited service under this plan as of the end of the plan year in which they attain normal retirement age (or current age, if later), the percentage in the preceding sentence will be multiplied by a fraction (not more than one), the numerator of which is the number of the participant’s years of credited service the participant is projected to have earned under this plan as of the end of the plan year in which the participant attains normal retirement age (or current age, if later), and the denominator of which is 35. If this paragraph is applicable, this plan will have a fresh-start date on the last day of the plan year preceding the plan year in which this paragraph is first applicable. In addition, if in any subsequent plan year this plan no longer benefits any participant who also benefits under another qualified plan or simplified employee pension maintained by the employer that provides for permitted disparity (or imputes permitted disparity), this plan will have a fresh-start date on the last day of the plan year preceding the plan year in which this paragraph is no longer applicable. For purposes of determining the participant’s overall permitted disparity limit, all years ending in the same calendar year are treated as the same year.

B. The applicable factor is the factor derived from the applicable table(s) below based on the normal retirement age under the plan, as specified in section _____ of the adoption agreement (determined without regard to any years of participation requirement), and the plan’s normal form of benefit, as specified in section _____ of the adoption agreement. If the employer elects as an integration level in the adoption agreement option _____ or _____, Table II shall apply. Otherwise, Table I shall apply.

(Note to reviewer: The first two blanks in the preceding paragraph should be filled in with the adoption agreement section numbers that correspond to LRM #14 and LRM #41, respectively. The last two blanks should be filled in with the adoption agreement section numbers that correspond to options 4 and 5 of section C of this LRM #27.)

(Note to reviewer: Treas. Reg. 1.401(l)-3(e) requires an adjustment in the 0.75 factor in the maximum excess or offset allowance with respect to benefits payable prior to a participant’s Social Security retirement age using factors set forth in the regulations. The tables below incorporate these factors so that the appropriate reduction is reflected in the plan’s benefit formula. Table I below contains the reduction factors from Table IV of Treas. Reg. 1.401(l)-3(e)(3) with respect to benefits commencing before a participant’s normal retirement age. The use of certain integration (or offset) levels requires an additional reduction to the .75 factor (see, for example., options 4 and 5 in section C below). Table II below contains factors that are the product of the factors from Table I below and 0.80. Table II is to be used if the employer selects option 4 or 5 in section C below as an integration (or offset) level.)

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Table I

Normal form of beneft→	Life annuity	Life annuity + 5 year certain	Life annuity + 10 year certain	Life annuity + 15 year certain	Life annuity + 20 year certain

Adjustment→	1.00	0.97	0.91	0.84	0.78

NRA

65	0.650	0.631	0.592	0.546	0.507
64	0.607	0.589	0.552	0.510	0.473
63	0.563	0.546	0.512	0.473	0.439
62	0.520	0.504	0.473	0.437	0.406
61	0.477	0.463	0.434	0.401	0.372
60	0.433	0.420	0.394	0.364	0.338
59	0.412	0.400	0.375	0.346	0.321
58	0.390	0.378	0.355	0.328	0.304
57	0.368	0.357	0.335	0.309	0.287
56	0.347	0.337	0.316	0.291	0.271
55	0.325	0.315	0.296	0.273	0.254

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Table II

Normal form of beneft→	Life annuity	Life annuity + 5 year certain	Life annuity + 10 year certain	Life annuity + 15 year certain	Life annuity + 20 year certain

Adjustment→	1.00	0.97	0.91	0.84	0.78

NRA

65	0.520	0.504	0.473	0.437	0.406
64	0.486	0.471	0.442	0.408	0.379
63	0.450	0.437	0.410	0.378	0.351
62	0.416	0.404	0.379	0.349	0.324
61	0.382	0.370	0.347	0.321	0.298
60	0.346	0.336	0.315	0.291	0.270
59	0.330	0.320	0.300	0.277	0.257
58	0.312	0.303	0.284	0.262	0.243
57	0.294	0.286	0.268	0.247	0.230
56	0.278	0.269	0.253	0.233	0.217
55	0.260	0.252	0.237	0.218	0.203

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(Note to reviewer: The tables above apply the factors derived from the simplified table contained in Treas. Reg. 1.401(l)-3(e)(3), as applicable to all individuals, regardless of their Social Security retirement age. As an alternative, the plan could apply the three separate sets of factors derived from Tables I, II and, III in Treas. Reg. 1.401(l)-3(e)(3) to participants with Social Security retirement ages of 67, 66 and 65, as applicable.)

(Note to reviewer: In the case of an excess plan, all optional forms of benefit, ancillary benefits, actuarial factors and other rights, benefits or features provided with respect to employer-provided benefits attributable to compensation at or below the integration level must be provided on the same terms as, or on terms at least as favorable as, those provided with respect to employer-provided benefits attributable to compensation above the integration level. In the case of an Offset plan, employer-provided benefits before application of the Offset must be provided on the same terms as, or on terms at least as favorable as those used to determine the Offset.)

C. The integration level (or offset level) for each plan year for each participant will be an amount equal to:

(1) ( ) such participant’s covered compensation for the plan year.

(2) ( ) the greater of $10,000 or one-half of the covered compensation of any person

who attains Social Security retirement age during the calendar year in which the plan year begins.

(3) ( ) $_____ (a single dollar amount not to exceed the greater of $10,000 or one-half

of covered compensation of any person who attains Social Security retirement age during the calendar year in which the plan year begins).

(4) ( ) $_____ (a single dollar amount that exceeds the greater of $10,000 or one-half

of covered compensation of any person who attains Social Security retirement age during the calendar year in which the plan year begins, but not to exceed the greater of $25,450 or 150% of the covered compensation of an individual attaining Social Security retirement age in the current plan year.

(5) ( ) a uniform percentage equal to ____% (insert a percentage that is greater than

100% but less than or equal to 150% of each participant’s covered compensation for the current year, but in no event in excess of the taxable wage base [for excess plans], or final average compensation [for Offset plans]).

(Note to reviewer: If options 4 or 5 above are selected, the maximum excess allowance (or maximum offset allowance, if applicable) must be determined from Table II above. If options 2 or 3 above are selected, in the case of a calendar year in which no individual could attain Social Security retirement age (the year 2003, for example), the rules are applied using covered compensation of an individual attaining Social Security retirement age in the preceding year.)

(Note to reviewer: A Pre-approved Plan may contain integration levels (or offset levels), not specified above that require greater reductions in the 0.75% factor. A plan that allows the employer to elect such integration levels must ensure that the maximum excess or offset allowance is appropriately limited. Because Standardized Plans that provide for disparity must meet the permitted disparity requirements of IRC 401(l) in form (see Treas.

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Reg. 1.401(a)(4)-3(b)(6)(ii)), these plans may not allow the employer to elect the intermediate amount integration level (or offset level) under Treas. Reg. 1.401(l)-3(d)(5), as that option requires the employer to demonstrate compliance with the demographic requirements of Treas. Reg. 1.401(l)-3(d)(8).)

(Optional provision:)

D. Accruals under the current benefit formula after the latest fresh-start date will be increased by the following cost-of living adjustment. The cost-of-living adjustment applies to former employees and will commence at the later of attainment of age 62 or commencement of benefits.

The cost-of-living adjustment will be equal to the lesser of:

(1) ____% per year, or

(2) the percentage adjustment to Social Security benefits for the year under Social Security Act § 215(i)(2)(A).