Section 7. Other Rules.

Section 7.1. Benefits Under Terminated Plans. If a defined benefit plan maintained by the employer has terminated with sufficient assets for the payment of benefit liabilities of all plan participants and a participant in the plan has not yet commenced benefits under the plan, the benefits provided pursuant to the annuities purchased to provide the participant’s benefits under the terminated plan at each possible annuity starting date shall be taken into account in applying the limitations of this article. If there are not sufficient assets for the payment of all participants’ benefit liabilities, the benefits taken into account shall be the benefits that are actually provided to the participant under the terminated plan.

Section 7.2. Benefits Transferred From the Plan. If a participant’s benefits under a defined benefit plan maintained by the employer are transferred to another defined benefit plan maintained by the employer and the transfer is not a transfer of distributable benefits pursuant to Treas. Reg. 1.411(d)-4, Q&A-3(c), the transferred benefits are not treated as being provided under the transferor plan (but are taken into account as benefits provided under the transferee plan). If a participant’s benefits under a defined benefit plan maintained by the employer are transferred to another defined benefit plan that is not maintained by the employer and the transfer is not a transfer of distributable benefits pursuant to Treas. Reg. 1.411(d)-4, Q&A3(c), the transferred benefits are treated by the employer’s plan as if such benefits were provided under annuities purchased to provide benefits under a plan maintained by the employer that terminated immediately prior to the transfer with sufficient assets to pay all participants’ benefit liabilities under the plan. If a participant’s benefits under a defined benefit plan maintained by the employer are transferred to another defined benefit plan in a transfer of distributable benefits pursuant to Treas. Reg. 1.411(d)-4, Q&A-3(c), the amount transferred is treated as a benefit paid from the transferor plan.

Section 7.3. Formerly Affiliated Plans of the Employer. A formerly affiliated plan of an employer shall be treated as a plan maintained by the employer, but the formerly affiliated plan shall be treated as if it had terminated immediately prior to the cessation of affiliation with sufficient assets to pay participants’ benefit liabilities under the plan and had purchased annuities to provide benefits.

Section 7.4. Plans of a Predecessor Employer. If the employer maintains a defined benefit plan that provides benefits accrued by a participant while performing services for a predecessor employer, the participant’s benefits under a plan maintained by the predecessor employer shall be treated as provided under a plan maintained by the employer. However, for this purpose, the plan of the predecessor employer shall be treated as if it had terminated immediately prior to the event giving rise to the predecessor employer relationship with sufficient assets to pay participants’ benefit liabilities under the plan, and had purchased annuities to provide benefits; the employer and the predecessor employer shall be treated as if they were a single employer immediately prior to such event and as unrelated employers immediately after the event; and if the event giving rise to the predecessor relationship is a benefit transfer, the transferred benefits shall be excluded in determining the benefits provided under the plan of the predecessor employer.

Section 7.5. Aggregation of employer’s plans. In accordance with IRC 415(f), all of the employer’s defined benefit plans are to be treated as one defined benefit plan for purposes of applying the limitations under IRC 415(b) and all of the employer’s defined contribution plans

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are to be treated as one defined contribution plan for purposes of applying the limitations under IRC 415 (c).

Section 7.6. Special Rules. The limitations of this article shall be determined and applied taking into account the rules in Treas. Regs. 1.415(f)-1(d), 1.415(f)-1(e), and 1.415(f)1(h).

Section 7.7. Aggregation with Multiemployer Plans.

(a) If the employer maintains a multiemployer plan, as defined in IRC 414(f), and the multiemployer plan so provides, only the benefits under the multiemployer plan that are provided by the employer shall be treated as benefits provided under a plan maintained by the employer for purposes of this article.

(b) Effective for Limitation Years ending after December 31, 2001, a multiemployer plan shall be disregarded for purposes of applying the compensation limitation of sections 6.3 and 6.9(a) to a plan which is not a multiemployer plan.

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

Sample Adoption Agreement Language:

A. If an employer (or a predecessor employer) maintains, or ever maintained, another qualified defined benefit plan in which any participant in this plan is (or was) a participant or could become a participant, the employer must complete this section.

(Note to reviewer: If the employer (or a predecessor employer) maintains or has ever maintained another defined benefit plan, the employer must provide language that will assure (without involving employer discretion) that the Maximum Permissible Benefit is never exceeded. In the alternative, the employer may identify the other defined benefit plan that will provide suitable language so that the Maximum Permissible Benefit is never exceeded. The Maximum Permissible Benefit cannot be corrected via a DC plan.)

B. The Limitation Year is the following 12-consecutive month period: ____________.

C. For purposes of calculating the participant's High Three-Year Average Compensation, a year of service is the following 12-consecutive month period: _____________.

D. Compensation shall mean all of each participant's:

( ) Wages, tips, and other compensation as reported on Form W-2

( ) IRC 3401(a) wages

( ) IRC 415 safe-harbor compensation

(Note to reviewer: As added by the Heroes Earnings Assistance and Relief Tax Act (HEART Act), IRC 3401(h) provides that a differential wage payment shall be treated as a payment of wages under IRC 3401(a) for a payment made after December 31, 2008. Also, these payments must be treated as compensation for purposes of applying the Code, but they are not required to be treated as compensation for purposes of determining contributions and benefits under a plan. See Notice 2010-15, Q&A-9 for guidance.)

If Compensation is defined as IRC 415 safe-harbor compensation, amounts received by an employee pursuant to a nonqualified unfunded deferred compensation plan

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( ) shall

( ) shall not

be considered Compensation in the year the amounts are actually received. Such amounts may be considered Compensation only to the extent includible in gross income.

E. Amounts earned but not paid during the Limitation Year solely because of the timing of pay periods and pay dates

( ) shall be included in compensation for the Limitation Year, 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.

( ) shall not be included in compensation for the Limitation Year.

F. (Complete this section to apply the plan’s rules regarding certain post-severance compensation in Limitation Years beginning before July 1, 2007.)

The provisions of the plan regarding the inclusion of certain post-severance compensation in the definition of Compensation shall apply in Limitation Years beginning after _____.

G. Compensation

( ) shall

( ) shall not

include amounts paid within 2 ½ months after severance from employment (or the end of the Limitation Year that includes the date of severance, if later) for unused accrued bona fide sick, vacation or other leave that the employee would have been able to use if employment had continued; and amounts received by an employee pursuant to a nonqualified unfunded deferred compensation plan which would have been paid at the same time if employment had continued, but only to the extent includible in gross income.

H. Compensation

( ) shall

( ) shall not

include amounts paid to an individual who does not currently perform services for the employer by reason of qualified military service 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.

I. Compensation shall include post-severance compensation paid to (check one or neither)

( ) any participant who is permanently and totally disabled. (Check this box only if

salary continuation applies to all participants who are permanently and totally disabled for a fixed or determinable period.)

( ) any permanently and totally disabled participant who, immediately before becoming

so disabled, was not a highly compensated employee.

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J. (Complete this section if the plan was previously amended to include transportation subsidies under IRC 132(f)(4) in Compensation for Limitation Years beginning before January 1, 2001.)

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) for Limitation Years beginning after _____. (Enter the effective date of the prior amendment, which may not be earlier than December 31, 1997.)

K. Compensation

( ) shall

( ) shall not

include deemed IRC 125 compensation.

L. (Complete this section if the plan was previously amended to include deemed IRC 125 compensation in the plan’s definition of Compensation for Limitation Years beginning before January 1, 2002.)

Compensation shall also include deemed IRC 125 compensation for Limitation Years beginning after _____. (Enter the effective date of the prior amendment, which may be no earlier than December 31, 1997.)

M. (Complete this section to exclude non-participant compensation.)

( ) (Check if this section applies.) Compensation shall not include amounts paid as

compensation to nonresident aliens who do not participate in the plan to the extent the compensation is excludable from gross income and not effectively connected with a U.S. trade or business.

N. 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 (check one)

( ) shall

( ) shall not

be automatically adjusted under IRC 415(d).

O. In the case of a participant who has had a severance from employment with the employer, the Defined Benefit Dollar Limitation applicable to the participant in any Limitation Year beginning after the date of severance (check one)

( ) shall

( ) shall not

be automatically adjusted under IRC 415(d).

P. In the event that the Employer maintains multiple defined benefit plans, the following provisions will apply to the extent necessary to satisfy IRC 415.

_____________________________________________________________________

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(Note to reviewer: The space provided should be completed by the Adopting Employer to add such plan provisions necessary to satisfy IRC 415 and preclude the possibility that the limitations therein could be exceeded by the required aggregation of multiple plans. The Maximum Permissible Benefit cannot be corrected via a DC plan.)