Section 6. — Publication 6165 — Defined Benefit Listing

Section 6.1. Annual Benefit: A benefit that is payable annually in the form of a straight life annuity. Except as provided below, where a benefit is payable in a form other than a straight life annuity, the benefit shall be adjusted to an actuarially equivalent straight life annuity that begins at the same time as such other form of benefit and is payable on the first day of each month, before applying the limitations of this article. For a participant who has or will have distributions commencing at more than one annuity starting date, the Annual Benefit shall be determined as of each such annuity starting date (and shall satisfy the limitations of this article as of each such date), actuarially adjusting for past and future distributions of benefits commencing at the other annuity starting dates. For this purpose, the determination of whether a new starting date has occurred shall be made without regard to Treas. Reg. 1.401(a)-20, Q&A10(d), and with regard to Treas. Regs. 1.415(b)1(b)(1)(iii)(B) and 1.415(b)-1(b)(1)(iii)(C).

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No actuarial adjustment to the benefit shall be made for (1) survivor benefits payable to a surviving spouse under a qualified joint and survivor annuity to the extent such benefits would not be payable if the participant’s benefit were paid in another form; (2) benefits that are not directly related to retirement benefits (such as a qualified disability benefit, preretirement incidental death benefits, and post-retirement medical benefits); or (3) the inclusion in the form of benefit of an automatic benefit increase feature, provided the form of benefit is not subject to IRC 417(e)(3) and would otherwise satisfy the limitations of this article, and the plan provides that the amount payable under the form of benefit in any Limitation Year shall not exceed the limits of this article applicable at the annuity starting date, as increased in subsequent years pursuant to IRC 415(d). For this purpose, an automatic benefit increase feature is included in a form of benefit if the form of benefit provides for automatic, periodic increases to the benefits paid in that form.

The determination of the Annual Benefit shall take into account social security supplements described in IRC 411(a)(9) and benefits transferred from another defined benefit plan, other than transfers of distributable benefits pursuant Treas. Reg. 1.411(d)-4, Q&A-3(c), but shall disregard benefits attributable to employee contributions or rollover contributions.

Effective for distributions in plan years beginning after December 31, 2003, the determination of actuarial equivalence of forms of benefit other than a straight life annuity shall be made in accordance with section 6.1(a) or section 6.1(b).

(a) Benefit Forms Not Subject to IRC 417(e)(3): The straight life annuity that is actuarially equivalent to the participant’s form of benefit shall be determined under this section 6.1(a) if the form of the participant’s benefit is either (1) a nondecreasing annuity (other than a straight life annuity) payable for a period of not less than the life of the participant (or, in the case of a qualified pre-retirement survivor annuity, the life of the surviving spouse), or (2) an annuity that decreases during the life of the participant merely because of (a) the death of the survivor annuitant (but only if the reduction is not below 50% of the benefit payable before the death of the survivor annuitant), or (b) the cessation or reduction of Social Security supplements or qualified disability payments (as defined in IRC 401(a) (11)).

(i) Limitation Years beginning before July 1, 2007. For Limitation Years beginning before July 1, 2007, the actuarially equivalent straight life annuity is equal to the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the participant’s form of benefit computed using whichever of the following produces the greater annual amount: (1) the interest rate specified in section _____ of the plan and the mortality table (or other tabular factor) specified in section _____ of the plan for adjusting benefits in the same form; and (2) a 5% interest rate assumption and the applicable mortality table defined in section _______ of the plan for that annuity starting date.

(Note to reviewer: The 1st and 2nd blanks above should be filled in with the section numbers of the plan that specify, respectively, the interest rate and mortality table for such actuarial equivalence. The 3rd blank above should be filled in with the section number of the plan that specifies the applicable mortality table and that corresponds to section 3 of LRM #42.)

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(ii) Limitation Years beginning on or after July 1, 2007. For Limitation Years beginning

on or after July 1, 2007, the actuarially equivalent straight life annuity is equal to the greater of (1) the annual amount of the straight life annuity (if any) payable to the participant under the plan commencing at the same annuity starting date as the participant’s form of benefit; and (2) the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the participant’s form of benefit, computed using a 5% interest rate assumption and the applicable mortality table defined in section _______ of the plan for that annuity starting date.

(Note to reviewer: The blank above should be filled in with the section number of the plan that specifies the applicable mortality table and that corresponds to section 3 of LRM #42.)

(b) Benefit Forms Subject to IRC 417(e)(3): The straight life annuity that is actuarially equivalent to the participant’s form of benefit shall be determined under this paragraph if the form of the participant’s benefit is other than a benefit form described in section 6.1(a). In this case, the actuarially equivalent straight life annuity shall be determined as follows:

(i) Annuity Starting Date in Plan Years Beginning After 2005. If the annuity starting date of the participant’s benefit occurs during a plan year beginning after 2005, the actuarially equivalent straight life annuity is equal to the greatest of (1) the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the participant’s form of benefit, computed using the interest rate specified in section _____ of the plan and the mortality table (or other tabular factor) specified in section _____ of the plan for adjusting benefits in the same form; (2) the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the participant’s form of benefit, computed using a 5.5% interest rate assumption and the applicable mortality table defined in section _______ of the plan; and (3) the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the participant’s form of benefit, computed using the applicable interest rate defined in section _____ of the plan and the applicable mortality table defined in section _______ of the plan, divided by 1.05.

However, effective for benefits with annuity starting dates during limitation years beginning after December 31, 2008, paragraph (b)(i)(3) of this section does not apply to a plan maintained by an eligible employer under IRC 408(p)(2)(C)(i) (generally, an employer that had no more than 100 employees who received at least $5,000 of compensation from the employer during the preceding year).

(Note to reviewer: The 1st and 2nd blanks above should be filled in with the section numbers of the plan that specify, respectively, the interest rate and mortality table specified for such actuarial equivalence. The 3rd blank above should be filled in with the section number of the plan that specifies the applicable mortality table and that corresponds to section 3 of LRM #42. The 4th and 5th blanks above should be filled in with the section numbers of the plan that specify, respectively, the applicable interest rate and applicable mortality table and that correspond, respectively, to sections 2 and 3 of LRM #42.)

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(ii) Annuity Starting Date in Plan Years Beginning in 2004 or 2005. If the annuity

starting date of the participant’s form of benefit is in a plan year beginning in 2004 or 2005, the actuarially equivalent straight life annuity is equal to the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the participant’s form of benefit, computed using whichever of the following produces the greater annual amount: (1) the interest rate specified in section _____ of the plan and the mortality table (or other tabular factor) specified in section _____ of the plan for adjusting benefits in the same form; and (2) a 5.5% interest rate assumption and the applicable mortality table defined in section _______ of the plan.

If the annuity starting date of the participant’s benefit is on or after the first day of the first plan year beginning in 2004 and before December 31, 2004, the application of this section 6.1(b)(ii) shall not cause the amount payable under the participant’s form of benefit to be less than the benefit calculated under the plan, taking into account the limitations of this article, except that the actuarially equivalent straight life annuity is equal to the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the participant’s form of benefit, computed using whichever of the following produces the greatest annual amount:

I. the interest rate specified in section _____ of the plan and the mortality table (or other tabular factor) specified in section _____ of the plan for adjusting benefits in the same form (as provided under the terms of the plan in effect as of the date of the distribution);

(Note to reviewer: The two blanks above should be filled in with the section numbers of the plan that specify, respectively, the interest rate and mortality table specified for such actuarial equivalence.)

II. the applicable interest rate defined in section _____ of the plan and the applicable mortality table defined in section _______ of the plan (as provided under the terms of the plan in effect as of the date of the distribution); and

(Note to reviewer: The two blanks above should be filled in with the section numbers of the plan that specify, respectively, the applicable interest rate and the applicable mortality table and that correspond respectively, to section 2 and 3 of LRM #42.)

the applicable interest rate defined in section _____ of the plan (as in effect on the last day of the last plan year beginning before January 1, 2004, under provisions of the plan then adopted and in effect) and the applicable mortality table defined in section _______ of the plan.

(Note to reviewer: The two blanks above should be filled in with the section numbers of

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the plan that specify, respectively, the applicable interest rate and the applicable mortality table and that correspond respectively, to section 2 and 3 of LRM #42.)

(Note to reviewer: Section 6.1(b)(ii) reflects the amendment to IRC 415(b)(2)(E)(ii) made by the Pension Funding Equity Act of 2004 (PFEA ‘04) § 101(b)(4) and the transition rule under PFEA ’04 § 101(d)(3), as described in Notice 2004-78. PFEA ’04 § 101(c)(1) provides relief from the requirements of IRC 411(d)(6) and Employee Retirement Income Security Act of 1974 (ERISA) 204(g) for plan amendments adopted pursuant to PFEA ’04 § 101 (as amended by Workers’ § 103(a) of WRERA) that are timely adopted and complied with in operation as of the effective date of the amendment. Notice 2004-78, Q&A-6 provides, in part, that this relief applies to a plan amendment for PFEA ’04 § 101(b)(4) that reflects an alternative, reasonable interpretation of the transition rule in PFEA ’04 § 101(d)(3), but that results in a lower distribution amount, as well as to a plan amendment that does not implement PFEA ’04 § 101(d)(3).)

Section 6.2. Compensation: As elected by the employer in section _____ of the adoption agreement, Compensation shall mean one of the following:

(Note to reviewer: The blank should be filled in with the section number of the adoption agreement where the employer selects the definition of compensation that will be used for purposes of the plan’s IRC 415 limitations and that corresponds to paragraph D of the sample adoption agreement provisions of this LRM #40.)

(a) Information required to be reported under IRC 6041, 6051, and 6052 (wages, tips, and other compensation as reported on Form W-2). Compensation is defined as wages, within the meaning of IRC 3401(a), and all other payments of compensation to an employee by the employer (in the course of the employer's trade or business) for which the employer is required to furnish the employee a written statement under IRS 6041(d), 6051(a)(3), and 6052. Compensation shall be determined without regard to any rules under IRC 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in IRC 3401(a)(2)).

(b) IRC 3401(a) wages. Compensation is defined as wages within the meaning of IRC 3401(a) for the purposes of income tax withholding at the source but determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in IRC 3401(a)(2)).

(c) IRC 415 safe-harbor compensation. Compensation is defined as wages, differential wage payments under IRC 3401(h) made after December 31, 2008, salaries, and fees for professional services and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the employer maintaining the plan to the extent that the amounts are includible in gross income (including, but not limited to, commissions paid salespersons, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, and reimbursements, or other expense allowances under a nonaccountable plan (as described in Treas. Reg. 1.62-2(c)), and excluding the following:

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(i) Employer contributions (other than elective contributions described in IRC 402(e)(3), IRC 408(k)(6), IRC 408(p)(2)(A)(i), or IRC 457(b)) to a plan of deferred compensation (including a simplified employee pension described in IRC 408(k) or a simple retirement account described in IRC 408(p), and whether or not qualified) to the extent such contributions are not includible in the employee’s gross income for the taxable year in which contributed, and any distributions (whether or not includible in gross income when distributed) from a plan of deferred compensation (whether or not qualified), other than, if the employer so elects in section _____ of the adoption agreement, amounts received during the year by an employee pursuant to a nonqualified unfunded deferred compensation plan to the extent includible in gross income;

(Note to reviewer: The blank should be filled in with the section number of the adoption agreement where the employer may elect to include in compensation distributions from a nonqualified unfunded plan of deferred compensation that are includible in gross income. See paragraph D of the sample adoption agreement provisions of this LRM #40.)

(ii) Amounts realized from the exercise of a nonstatutory stock option (that is, an option

other than a statutory stock option as defined in Treas. Reg. 1.421-1(b)), or when restricted stock (or property) held by the employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture;

(iii) Amounts realized from the sale, exchange or other disposition of stock acquired

under a statutory stock option;

(iv) Other amounts that receive special tax benefits, such as premiums for group-term life

insurance (but only to the extent that the premiums are not includible in the gross income of the employee and are not salary reduction amounts that are described in IRC 125);

(v) Other items of remuneration that are similar to any of the items listed in (i) through (iv).

For any self-employed individual, Compensation shall mean earned income.

Except as provided herein, for Limitation Years beginning after December 31, 1991, compensation for a Limitation Year is the compensation actually paid or made available during such Limitation Year. If elected by the employer in section _____ of the adoption agreement, compensation for a Limitation Year shall include amounts earned but not paid during the Limitation Year solely because of the timing of pay periods and pay dates, provided the amounts are paid during the first few weeks of the next Limitation Year, the amounts are included on a uniform and consistent basis with respect to all similarly situated employees, and no compensation is included in more than one Limitation Year.

(Note to reviewer: The blank above should be filled in with the section of the adoption agreement where the employer may elect to include compensation earned in the limitation year but not paid in that limitation year solely because of the timing of pay periods and pay dates. See paragraph E of the sample adoption agreement provisions of this LRM #40.)

For Limitation Years beginning on or after July 1, 2007, or such earlier date as the employer specifies in section _____ of the adoption agreement, compensation for a Limitation Year shall

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also include compensation paid by the later of 2 ½ months after an employee’s severance from employment with the employer maintaining the plan or the end of the Limitation Year that includes the date of the employee’s severance from employment with the employer maintaining the plan, if:

(Note to reviewer: The blank should be filled in with the section number of the adoption agreement where the employer may specify an effective date that is before the first limitation year beginning on or after July 1, 2007 for including certain postseverance compensation in the plan’s definition of compensation. See paragraph F of the sample adoption agreement provisions of this LRM #40.)

(d) the payment is regular compensation for services during the employee’s regular working hours, or compensation for services outside the employee’s regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments, and, absent a severance from employment, the payments would have been paid to the employee while the employee continued in employment with the employer; or, if the employer so elects in section _____ of the adoption agreement,

(Note to reviewer: The blank should be filled in with the section number of the adoption agreement where the employer may elect to include in compensation certain postseverance pay for unused accrued leave as well as post-severance payments from a nonqualified unfunded plan of deferred compensation. See paragraph G of the sample adoption agreement provisions of this LRM #40.)

(e) the payment is for unused accrued bona fide sick, vacation or other leave that the employee would have been able to use if employment had continued; or

(f) the payment is received by the employee pursuant to a nonqualified unfunded deferred compensation plan and would have been paid at the same time if employment had continued, but only to the extent includible in gross income.

Any payments not described above shall not be considered compensation if paid after severance from employment, even if they are paid by the later of 2 ½ months after the date of severance from employment or the end of the Limitation Year that includes the date of severance from employment, except, (1) if elected by the employer in section _____ of the adoption agreement, payments to an individual who does not currently perform services for the employer by reason of qualified military service (within the meaning of IRC 414(u)(1)) to the extent these payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the employer rather than entering qualified military service; or (2) if elected by the employer in section _____ of the adoption agreement, compensation paid to a participant who is permanently and totally disabled, as defined in IRC 22(e)(3), provided, as elected by the employer in section _____ of the adoption agreement, salary continuation applies to all participants who are permanently and totally disabled for a fixed or determinable period, or the participant was not a highly compensated employee, as defined in IRC 414(q), immediately before becoming disabled.

Back pay, within the meaning of Treas. Reg. 1.415(c)-2(g)(8), shall be treated as compensation for the Limitation Year to which the back pay relates to the extent the back pay represents wages and compensation that would otherwise be included under this definition.

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(Note to reviewer: The 1st and 2nd blanks should be filled in with the section numbers of the adoption agreement where the employer may elect to include in compensation certain salary continuation payments to individuals in qualified military service and to individuals who are permanently and totally disabled, respectively. The 3rd blank should be filled in with the section of the adoption agreement where the employer elects whether the inclusion in compensation of salary continuation payments to permanently and totally disabled participants, if applicable, shall apply with respect to all such participants or with respect to all such participants who were not highly compensated employees immediately before becoming disabled. See sections H and I of the sample adoption agreement provisions of this LRM #40.)

For Limitation Years beginning after December 31, 1997, compensation paid or made available during such Limitation Year shall include amounts that would otherwise be included in Compensation but for an election under IRC 125(a), 402(e)(3), 402(h)(1)(B), 402(k), or 457(b).

For Limitation Years beginning after December 31, 2000, or such earlier effective date as the employer specifies in section _____ of the adoption agreement, Compensation shall also include any elective amounts that are not includible in the gross income of the employee by reason of IRC 132(f)(4).

(Note to reviewer: The blank should be filled in with the section number of the adoption agreement where the employer may specify an earlier effective date, pursuant to a prior plan amendment, for including IRC 132(f)(4) amounts in Compensation. See section J of the sample adoption agreement provisions of this LRM #40.)

If elected by the employer in section _____ of the adoption agreement, for Limitation Years beginning after December 31, 2001 or such earlier effective date as the employer specifies in section _____ of the adoption agreement, Compensation shall also include deemed IRC 125 compensation. Deemed IRC 125 compensation is an amount that is excludable under IRC 106 that is not available to a participant in cash in lieu of group health coverage under an IRC 125 arrangement solely because the participant is unable to certify that he or she has other health coverage. Amounts are deemed IRC 125 compensation only if the employer does not request or otherwise collect information regarding the participant’s other health coverage as part of the enrollment process for the health plan.

(Note to reviewer: The 1st blank should be filled in with the section number of the adoption agreement where the employer may elect to include deemed IRC 125 compensation in Compensation. See paragraph K of the sample adoption agreement provisions of this LRM #40. The 2nd blank should be filled in with the section number of the adoption agreement where the employer may elect to specify an earlier effective date, pursuant to prior plan amendment, for including deemed IRC 125 compensation in Compensation. See paragraph L of the sample adoption agreement provisions of this LRM #40.)

If elected by the employer in section _____ of the adoption agreement, Compensation shall not include amounts paid as compensation to a nonresident alien, as defined in IRC 7701(b)(1)(B), who is not a participant in the plan to the extent the compensation is excludable from gross income and is not effectively connected with the conduct of a trade or business within the United States.

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(Note to reviewer: This election is provided as a rule of administrative convenience for purposes of determining who is a key employee for purposes of IRC 416 and who is a highly compensated employee as defined in IRC 414(q). The blank should be filled in with the section number of the adoption agreement where the employer may elect to exclude non-participant compensation. See paragraph M of the sample adoption agreement provisions of this LRM #40.)

(Note to reviewer: For plans that are sponsored by Indian tribal governments, effective for taxable years ending on or after November 15, 2013, proposed regulations clarify that compensation received by Indian tribal members for services rendered in performing certain fishing rights-related activities may be treated as compensation for purposes of applying IRC 415 limitations, even though these payments might otherwise be excludible from gross income. These regulations clarify that exclusion notwithstanding, fishing rights-related income is includible in IRC 415 compensation and amounts may be contributed to a qualified retirement plan based on this income. Under these regulations, fishing rights-related activity with respect to Indian tribes includes any activity directly related to (1) harvesting, processing or transporting fish harvested in the exercise of a recognized fishing right of the tribe; or (2) selling such fish but only if substantially all of such harvesting was performed by members of such tribe.)

(Note to reviewer: Pursuant to Section 119 of the SECURE 2.0 Act, IRC 415(b)(12) provides that rural electric cooperative retirement plans no longer have a compensation- based limit for participants who are non-highly compensated employees for limitation years ending after the date of enactment of the SECURE 2.0 Act (12/29/2022).)

Section 6.3. Defined Benefit Compensation Limitation: 100% of a participant’s High ThreeYear Average Compensation, payable in the form of a straight life annuity.

If elected by the employer in section _____ of the adoption agreement, in the case of a participant who has had a severance from employment with the employer, the Defined Benefit Compensation Limitation applicable to the participant in any Limitation Year beginning after the date of severance shall be automatically adjusted by multiplying the limitation applicable to the participant in the prior Limitation Year by the annual adjustment factor under IRC 415(d) that is published in the Internal Revenue Bulletin. The adjusted compensation limit shall apply to Limitation Years ending with or within the calendar year of the date of the adjustment, but a participant’s benefits shall not reflect the adjusted limit prior to January 1 of that calendar year.

(Note to reviewer: The blank should be filled in with the section number of the adoption agreement where the employer may elect whether to provide automatic adjustments under IRC 415(d) of the compensation limit for participants who have had a severance from employment with the employer. See paragraph N of the sample adoption agreement provisions of this LRM #40.)

In the case of a participant who is rehired after a severance from employment, the Defined Benefit Compensation Limitation is the greater of 100% of the participant’s High ThreeYear Average Compensation, as determined prior to the severance from employment, as adjusted pursuant to the preceding paragraph, if applicable; or 100% of the participant’s High Three-Year Average Compensation, as determined after the severance from employment under section 6.7.

Section 6.4. Defined Benefit Dollar Limitation: Effective for Limitation Years ending after

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December 31, 2001, the Defined Benefit Dollar Limitation is $160,000, automatically adjusted under IRC 415(d), effective January 1 of each year, as published in the Internal Revenue Bulletin, and payable in the form of a straight life annuity. The new limitation shall apply to Limitation Years ending with or within the calendar year of the date of the adjustment, but a participant’s benefits shall not reflect the adjusted limit prior to January 1 of that calendar year. The employer shall elect in section _____ of the adoption agreement whether the automatic annual adjustment of the Defined Benefit Dollar Limitation under IRC 415(d) shall apply to participants who have had a separation from employment.

(Note to reviewer: The blank should be filled in with the section number of the adoption agreement where the employer may elect whether to provide automatic adjustments under IRC 415(d) of the dollar limit for participants who have had a severance from employment with the employer. See paragraph O of the sample adoption agreement provisions of this LRM #40.)

(Note to reviewer: In certain cases where a plan incorporated the IRC 415 limits by reference, these limits increased automatically without a plan amendment. However, Pre-approved Plans may not incorporate the IRC 415 limits by reference. Plan terms must preclude the possibility that an IRC 415 limitation violation could occur.)

Section 6.5. Employer: For purposes of this article, employer shall mean the employer that adopts this plan and all members of a controlled group of corporations (as defined in IRC 414(b), as modified by IRC 415(h)), all commonly controlled trades or businesses (as defined in IRC 414(c), as modified, except in the case of a brother-sister group of trades or businesses under common control, by IRC 415(h)), or affiliated service groups (as defined in IRC 414(m)) of which the Adopting Employer is a part, and any other entity required to be aggregated with the employer pursuant to IRC 414(o).

Section 6.6. Formerly Affiliated Plan of the Employer: A plan that, immediately prior to the cessation of affiliation, was actually maintained by the employer and, immediately after the cessation of affiliation, is not actually maintained by the employer. For this purpose, cessation of affiliation means the event that causes an entity to no longer be considered the employer, such as the sale of a member of a controlled group of corporations (as defined in IRC 414(b), as modified by IRC 415(h)) to an unrelated corporation, or that causes a plan to not actually be maintained by the employer, such as transfer of plan sponsorship outside a controlled group.

Section 6.7. High Three-Year Average Compensation: The average compensation for the three consecutive years of service (or, if the participant has less than three consecutive years of service, the participant’s longest consecutive period of service, including fractions of years, but not less than one year) with the employer that produces the highest average. A year of service with the employer is the 12-consecutive month period defined in section ______ of the adoption agreement. In the case of a participant who is rehired by the employer after a severance from employment, the participant’s high three-year average compensation shall be calculated by excluding all years for which the participant performs no services for and receives no compensation from the employer (the break period) and by treating the years immediately preceding and following the break period as consecutive. A participant’s compensation for a year of service shall not include compensation in excess of the limitation under IRC 401(a)(17) that is in effect for the calendar year in which such year of service begins.

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(Note to reviewer: The blank should be filled in with the section number of the adoption agreement where the employer selects the 12-consecutive month period that will be used as a year of service for purposes of calculating a participant’s high three-year average compensation. See paragraph C of the sample adoption agreement provisions of this LRM#40.)

(Note to reviewer: Treas. Reg. 1.415(c)-2(f) requires that the definition of compensation used in applying the limitations of IRC 415 not reflect compensation for a year that is in excess of the limitation of IRC 401(a)(17) that applies to that year. Plan provisions will not be treated as failing to satisfy this rule merely because the benefit calculated as of the end of the last Limitation Year beginning before July 1, 2007, under provisions of the plan adopted and in effect before April 5, 2007, the plan’s definition of compensation used for purposes of the limitations of IRC 415(b)(1)(B) reflects compensation for a year in excess of the limitation of IRC 401(a)(17) that applies to that year.)

Section 6.8. Limitation Year: A calendar year, or the 12-consecutive month period elected by the employer in section ______ of the adoption agreement. All qualified plans maintained by the employer must use the same Limitation Year. If the Limitation Year is amended to a different 12-consecutive month period, the new Limitation Year must begin on a date within the Limitation Year in which the amendment is made.

(Note to reviewer: The blank should be filled in with the section number of the adoption agreement that corresponds to paragraph B of the sample adoption agreement provisions of this LRM #40.)

Section 6.9. Maximum Permissible Benefit: The lesser of the Defined Benefit Dollar Limitation or the Defined Benefit Compensation Limitation (both adjusted where required, as provided below).

(a) Adjustment for Less Than 10 Years of Participation or Service: If the participant has less than 10 years of participation in the plan, the Defined Benefit Dollar Limitation shall be multiplied by a fraction -- (1) the numerator of which is the number of Years (or part thereof, but not less than one year) of Participation in the plan, and (2) the denominator of which is 10. In the case of a participant who has less than ten Years of Service with the employer, the Defined Benefit Compensation Limitation shall be multiplied by a fraction -- (1) the numerator of which is the number of Years (or part thereof, but not less than one year) of Service with the employer, and (2) the denominator of which is 10.

(b) Adjustment of Defined Benefit Dollar Limitation for Benefit Commencement Before Age 62 or after Age 65: Effective for benefits commencing in Limitation Years ending after December 31, 2001, the Defined Benefit Dollar Limitation shall be adjusted if the annuity starting date of the participant’s benefit is before age 62 or after age 65. If the annuity starting date is before age 62, the Defined Benefit Dollar Limitation shall be adjusted under section 6.9(b)(i), as modified by section 6.9(b)(iii). If the annuity starting date is after age 65, the Defined Benefit Dollar Limitation shall be adjusted under section 6.9(b)(ii), as modified by section 6.9(b)(iii).

(Note to reviewer: See the 2nd note to reviewer following section 6.4 of this LRM #40.)

(i) Adjustment of Defined Benefit Dollar Limitation for Benefit Commencement Before Age

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62:

I. Limitation Years Beginning Before July 1, 2007. If the annuity starting date for the participant’s benefit is prior to age 62 and occurs in a Limitation Year beginning before July 1, 2007, the Defined Benefit Dollar Limitation for the participant’s annuity starting date is the annual amount of a benefit payable in the form of a straight life annuity commencing at the participant’s annuity starting date that is the actuarial equivalent of the Defined Benefit Dollar Limitation (adjusted under section 6.9(a) for years of participation less than 10, if required) with actuarial equivalence computed using whichever of the following produces the smaller annual amount: (1) the interest rate specified in section _____ of the plan and the mortality table (or other tabular factor) specified in section _____ of the plan; or (2) a 5% interest rate assumption and the applicable mortality table as defined in section _____ of the plan.

(Note to reviewer: The 1st and 2nd blanks above should be filled in with the section numbers of the plan that specify, respectively, the interest rate and mortality table (or other tabular factor) used to determine actuarial equivalence under the plan for early retirement purposes. The 3rd blank above should be filled in with the section number of the plan that specifies the applicable mortality table and that corresponds to section 3 of LRM #42.)

II. Limitation Years Beginning on or After July 1, 2007.

A. Plan Does Not Have Immediately Commencing Straight Life Annuity Payable at Both Age 62 and the Age of Benefit Commencement. If the annuity starting date for the participant’s benefit is prior to age 62 and occurs in a Limitation Year beginning on or after July 1, 2007, and the plan does not have an immediately commencing straight life annuity payable at both age 62 and the age of benefit commencement, the Defined Benefit Dollar Limitation for the participant’s annuity starting date is the annual amount of a benefit payable in the form of a straight life annuity commencing at the participant’s annuity starting date that is the actuarial equivalent of the Defined Benefit Dollar Limitation (adjusted under section 6.9(a) for years of participation less than 10, if required) with actuarial equivalence computed using a 5% interest rate assumption and the applicable mortality table for the annuity starting date as defined in section _______ of the plan (and expressing the participant’s age based on completed calendar months as of the annuity starting date).

(Note to reviewer: The blank above should be filled in with the section number of the plan that specifies the applicable mortality table and that corresponds to section 3 of LRM #42.)

B. Plan Has Immediately Commencing Straight Life Annuity Payable at Both Age 62 and the Age of Benefit Commencement. If the annuity starting date for the participant’s benefit is prior to age 62 and occurs in a Limitation Year beginning on or after July 1, 2007, and the plan has an immediately commencing straight life annuity payable at both age 62 and the age of benefit commencement, the Defined Benefit Dollar Limitation for the participant’s annuity starting date is

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the lesser of the limitation determined under section 6.9(b)(i)II.A. and the Defined Benefit Dollar Limitation (adjusted under section 6.9(a) for years of participation less than 10, if required) multiplied by the ratio of the annual amount of the immediately commencing straight life annuity under the plan at the participant’s annuity starting date to the annual amount of the immediately commencing straight life annuity under the plan at age 62, both determined without applying the limitations of this article.

C. Notwithstanding any other provisions of this section 6.9(b)(i), the age-adjusted dollar limit applicable to a participant shall not decrease on account of an increase in age or the performance of additional services.

(ii) Adjustment of Defined Benefit Dollar Limitation for Benefit Commencement After

Age 65:

I. Limitation Years Beginning Before July 1, 2007. If the annuity starting date for the participant’s benefit is after age 65 and occurs in a Limitation Year beginning before July 1, 2007, the Defined Benefit Dollar Limitation for the participant’s annuity starting date is the annual amount of a benefit payable in the form of a straight life annuity commencing at the participant’s annuity starting date that is the actuarial equivalent of the Defined Benefit Dollar Limitation (adjusted under section 6.9(a) for years of participation less than 10, if required) with actuarial equivalence computed using whichever of the following produces the smaller annual amount: (1) the interest rate specified in section _____ of the plan and the mortality table (or other tabular factor) specified in section _____ of the plan; or (2) a 5% interest rate assumption and the applicable mortality table as defined in section _____ of the plan.

(Note to reviewer: The 1st and 2nd blanks above should be filled in with the section numbers of the plan that specify, respectively, the interest rate and mortality table (or other tabular factor) used to determine actuarial equivalence under the plan for delayed retirement purposes. The 3rd blank above should be filled in with the section number of the plan that specifies the applicable mortality table and that corresponds to section 3 of LRM #42.)

II. Limitation Years Beginning on or After July 1, 2007.

A. Plan Does Not Have Immediately Commencing Straight Life Annuity Payable at Both

Age 65 and the Age of Benefit Commencement. If the annuity starting date for the participant’s benefit is after age 65 and occurs in a Limitation Year beginning on or after July 1, 2007, and the plan does not have an immediately commencing straight life annuity payable at both age 65 and the age of benefit commencement, the Defined Benefit Dollar Limitation at the participant’s annuity starting date is the annual amount of a benefit payable in the form of a straight life annuity commencing at the participant’s annuity starting date that is the actuarial equivalent of the Defined Benefit Dollar Limitation (adjusted under section 6.9(a) for years of participation less than 10, if required), with actuarial equivalence computed using a 5% interest rate assumption and the applicable mortality table for that annuity starting date as defined in section _______ of the plan (and expressing the participant’s age based on

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completed calendar months as of the annuity starting date).

(Note to reviewer: The blank above should be filled in with the section number of the plan that specifies the applicable mortality table and that corresponds to section 3 of LRM #42.)

B. Plan Has Immediately Commencing Straight Life Annuity Payable at Both Age 65

and the Age of Benefit Commencement. If the annuity starting date for the participant’s benefit is after age 65 and occurs in a Limitation Year beginning on or after July 1, 2007, and the plan has an immediately commencing straight life annuity payable at both age 65 and the age of benefit commencement, the Defined Benefit Dollar Limitation at the participant’s annuity starting date is the lesser of the limitation determined under section 6.9(b)(ii)II.A. and the Defined Benefit Dollar Limitation (adjusted under section 6.9(a) for years of participation less than 10, if required) multiplied by the ratio of the annual amount of the adjusted immediately commencing straight life annuity under the plan at the participant’s annuity starting date to the annual amount of the adjusted immediately commencing straight life annuity under the plan at age 65, both determined without applying the limitations of this article. For this purpose, the adjusted immediately commencing straight life annuity under the plan at the participant’s annuity starting date is the annual amount of such annuity payable to the participant, computed disregarding the participant’s accruals after age 65 but including actuarial adjustments even if those actuarial adjustments are used to offset accruals; and the adjusted immediately commencing straight life annuity under the plan at age 65 is the annual amount of such annuity that would be payable under the plan to a hypothetical participant who is age 65 and has the same accrued benefit as the participant.

(Note to reviewer: If the plan permits an employer to select a normal retirement age (NRA) less than 65, the plan’s provisions regarding actuarial increases for deferred benefits must be coordinated with the age adjustments in section 6.9(b) of this LRM #40 to ensure that the plan does not violate IRC 401(a). Such a violation may be avoided if the plan provides for payment of benefits at NRA, despite continued employment, or if the plan already provides for the suspension of benefits in accordance with IRC 411(a)(3)(B). See Q&A-4 of Rev. Rul. 2001-51, section 4 of LRM #42, and LRM #55.)

(iii) Notwithstanding the other requirements of this section 6.9(b), in adjusting the

Defined Benefit Dollar Limitation for the participant’s annuity starting date under sections 6.9(b)(i)I., 6.9(b)(i)II.A., 6.9(b)(ii)I., or 6.9(b)(ii)II.A., no adjustment shall be made to reflect the probability of a participant’s death between the annuity starting date and age 62, or between age 65 and the annuity starting date, as applicable, if benefits are not forfeited upon the death of the participant prior to the annuity starting date. To the extent benefits are forfeited upon death before the annuity starting date, such an adjustment shall be made. For this purpose, no forfeiture shall be treated as occurring upon the participant’s death if the plan does not charge participants for providing a qualified preretirement survivor annuity, as defined in IRC 417(c), upon the participant’s death.

(c) Minimum benefit permitted: Notwithstanding anything else in this section to the contrary, the benefit otherwise accrued or payable to a participant under this plan shall be deemed

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not to exceed the Maximum Permissible Benefit if:

(i) the retirement benefits payable for a Limitation Year under any form of benefit with respect to such participant under this plan and under all other defined benefit plans (without regard to whether a plan has been terminated) ever maintained by the employer do not exceed $10,000 multiplied by a fraction – (1) the numerator of which is the participant’s number of Years (or part thereof, but not less than one year) of Service (not to exceed 10) with the employer, and (2) the denominator of which is 10; and

(ii) the employer (or a predecessor employer) has not at any time maintained a defined

contribution plan in which the participant participated (for this purpose, mandatory employee contributions under a defined benefit plan, individual medical accounts under IRC 401(h), and accounts for postretirement medical benefits established under IRC 419A(d)(1) are not considered a separate defined contribution plan).

Section 6.10. Predecessor Employer: If the employer maintains a plan that provides a benefit which the participant accrued while performing services for a former employer, the former employer is a predecessor employer with respect to the participant in the plan. A former entity that antedates the employer is also a predecessor employer with respect to a participant if, under the facts and circumstances, the employer constitutes a continuation of all or a portion of the trade or business of the former entity.

Section 6.11. Severance from Employment: An employee has a severance from employment when the employee ceases to be an employee of the employer maintaining the plan. An employee does not have a severance from employment if, in connection with a change of employment, the employee’s new employer maintains the plan with respect to the employee.

Section 6.12. Year of Participation: The participant shall be credited with a Year of Participation (computed to fractional parts of a year) for each accrual computation period for which the following conditions are met: (1) the participant is credited with at least the number of hours of service (or period of service if the elapsed time method is used) for benefit accrual purposes, required under the terms of the plan in order to accrue a benefit for the accrual computation period, and (2) the participant is included as a participant under the eligibility provisions of the plan for at least one day of the accrual computation period. If these two conditions are met, the portion of a year of participation credited to the participant shall equal the amount of benefit accrual service credited to the participant for such accrual computation period. A participant who is permanently and totally disabled within the meaning of IRC 415(c) (3)(C)(i) for an accrual computation period shall receive a Year of Participation with respect to that period. In addition, for a participant to receive a Year of Participation (or part thereof) for an accrual computation period, the plan must be established no later than the last day of such accrual computation period. In no event shall more than one Year of Participation be credited for any 12-month period.

Section 6.13. Year of Service: For purposes of section 6.7, the participant shall be credited with a Year of Service (computed to fractional parts of a year) for each accrual computation period for which the participant is credited with at least the number of hours of service (or period of service if the elapsed time method is used) for benefit accrual purposes, required under the terms of the plan in order to accrue a benefit for the accrual computation period, taking into account only service with the employer or a predecessor employer.

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