70. Minimum accrued benefit

Statement of Requirement: Code §I RC 416(c); Treas. Reg. § 1.416-1; Rev. Proc. 2017-41, 2017-29 I.R.B. 922 023-37, section 9.02(5 .07)

Document Provision: _____

Sample Plan Language:

(1) Notwithstanding any other provision in this plan except (3), (4), (5), and (6) below, for any plan year in which this plan is top-heavy, each participant who is not a key employee and has completed 1,000 hours of service will accrue a benefit (to be provided solely by employer contributions and expressed as a life annuity commencing at normal retirement age) of not less than 2% of his or her highest average compensation for the five consecutive years for which the participant had the highest compensation. The aggregate compensation for the years during such 5-year period in which the participant was credited with a year of service will be divided by the number of such years in order to determine average annual compensation. The minimum accrual is determined without regard to any Social Security contribution. The minimum accrual applies even though under other plan provisions the participant would not otherwise be entitled to receive an accrual, or would have received a lesser accrual for the year because (i) the non-key employee fails to make mandatory contributions to the plan, (ii) the non-key employee’s compensation is less than a stated amount, (iii) the non-key employee is not employed on the last day of the accrual computation period, or (iv) the plan is

326 | Defined Benefit Plan LRM Package 08/2020 06/2026

integrated with Social Security.

(2) For purposes of computing the minimum accrued benefit, compensation shall mean compensation as defined in section _____ of the plan and related elections in the adoption agreement, as limited by Code §I RC 401(a)(17).

(Note to reviewer: The blank should be filled in with the section number of the plan that corresponds to section 6.2 of LRM #40.)

(3) No accrual shall be provided pursuant to (1) above for a year in which the plan does not benefit any key employee or former key employee.

(4) No additional benefit accruals shall be provided pursuant to (1) above to the extent that the total accruals on behalf of the participant attributable to employer contributions will provide a benefit expressed as a life annuity commencing at normal retirement age that equals or exceeds 20% of the participant’s highest average compensation for the five consecutive years for which the participant had the highest compensation.

(5) The provision in (1) above shall not apply to any participant to the extent the participant is covered under any other plan or plans of the employer and the employer has provided in section _____ of the adoption agreement that the minimum allocation or benefit requirement applicable to top-heavy plans will be met in the other plan or plans.

(Note to reviewer: The blank above should be filled in with the section number of the adoption agreement corresponding to the sample adoption agreement provision B. at the end of this LRM #70.)

(Note to reviewer: Provision (5) above may cause the plan to fail to satisfy the uniformity requirement under Treas. Reg. § 1.401(a)(4)-3(b)(2), even though all other requirements applicable to the regulatory safe harbors are met.)

(6) All accruals of employer-derived benefits, whether or not attributable to years for which the plan is top-heavy, may be used in computing whether the minimum accrual requirements of paragraph (3) above are satisfied.

Sample Adoption Agreement Language:

A. For purposes of minimum top-heavy accruals, each non-key employee will accrue a minimum benefit of _____% (not less than 2%) of compensation for each year the plan is top-heavy.

Sample Adoption Agreement Language on Minimum Benefits for Employees Also Covered Under Another Plan:

B. Complete if the top-heavy minimum benefit requirement is met in another plan.

Name of the other plan: _________________

Minimum benefit that will be provided under such other plan: ______________

Employees who will receive the minimum benefit under such other plan: __________________

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327 | Defined Benefit Plan LRM Package 08/2020 06/2026