Regulation 1.415(a)-1 General rules with respect to limitations on benefits and contributions under qualified plans. (e) Rules for plans maintained by more than one employer. (f) Special rules (Excerpts) Regulation 1.415(f)-1 Aggregating plans. (a) In general. (b) Affiliated employers, affiliated service groups, and leased employees. (c) Predecessor employer. (d) Special rules (e) Previously unaggregated plans (f) Section 403(b) annuity contracts (g) Multiemployer plans (h) Special rules for aggregating certain plans, etc. (i) [Reserved.] (j) Examples.
Except as provided in § 1.415(f)-1(g)(2)(i) (regarding aggregation of multiemployer plans with plans other than multiemployer plans), for purposes of applying the limitations of section 415 with respect to a participant in a plan maintained by more than one employer, benefits and contributions attributable to such participant from all of the employers maintaining the plan must be taken into account. Furthermore, in applying the limitations of section 415 with respect to a participant in such a plan, the total compensation received by the participant from all of the employers maintaining the plan is taken into account under the plan, unless the plan specifies otherwise.
Pursuant to section 414(b) and § 1.414(b)-1, all employees of all corporations that are members of a controlled group of corporations (within the meaning of section 1563(a), as modified by section 1563(f)(5), and determined without regard to section 1563(a)(4) and (e)(3)(C)) are treated as employed by a single employer for purposes of section 415. Similarly, pursuant to section 414(c) and regulations promulgated under section 414(c), all employees of trades or businesses that are under common control are treated as employed by a single employer. Thus, any defined benefit plan or defined contribution plan maintained by any member of a controlled group of corporations (within the meaning of section 414(b)) or by any trade or business (whether or not incorporated) that is part of a group of trades or businesses that are under common control (within the meaning of section 414(c)) is deemed maintained by all such members or such trades or businesses. Pursuant to section 415(h), for purposes of section 415, sections 414(b) and 414(c) are applied by using the phrase "more than 50 percent" instead of the phrase "at least 80 percent" each place the latter phrase appears in section 1563(a)(1) and in the regulations under section 414(c) (except for purposes of determining whether two or more organizations are a brother-sister group of trades or businesses under common control under the rules in § 1.414(c)-2(c)).
Any defined benefit plan or defined contribution plan maintained by any member of an affiliated service group (within the meaning of section 414(m)) is deemed maintained by all members of that affiliated service group.
Pursuant to section 414(n), except as provided in paragraph (f)(3)(ii) of this section, with respect to any person (referred to as the recipient) for whom a leased employee (within the meaning of section 414(n)(2)) performs services, the leased employee is treated as an employee of the recipient, but contributions or benefits provided by the leasing organization that are attributable to services performed for the recipient are treated as provided under a plan maintained by the recipient.
Pursuant to section 414(n)(5), the rule of paragraph (f)(3)(i) of this section does not apply to a leased employee with respect to services performed for a recipient if --
(A) The leased employee is covered by a plan that is maintained by the leasing organization and that meets the requirements of section 414(n)(5)(B); and
(B) Leased employees (determined without regard to this paragraph (f)(3)(ii)) do not constitute more than 20% of the recipient's nonhighly compensated workforce.
See section 415(n) for rules regarding the application of the limitations of sections 415(b) and (c) where a participant makes contributions (including a transfer described in section 403(b)(13) or section 457(e)(17)) to a defined benefit governmental plan to purchase permissive service credit under the plan.
For purposes of this section and §§1.415(b)-1, 1.415(b)-2, 1.415(c)-1, 1.415(c)-2, 1.415(d)-1, 1.415(f)-1, 1.415(g)-1, and 1.415(j)-1, whether an employee has a severance from employment with the employer that maintains a plan is determined in the same manner as under §1.401(k)-1(d)(2) except that, for purposes of determining the employer of an employee, the modifications provided under section 415(h) (described in paragraph (f)(1) of this section) to the employer aggregation rules apply. Thus, an employee has a severance from employment when the employee ceases to be an employee of the employer maintaining the plan, and an employee does not have a severance from employment if, in connection with a change of employment, the employee’s new employer maintains such plan with respect to the employee. The determination of whether an employee ceases to be an employee of the employer maintaining the plan is based on all of the relevant facts and circumstances.
A participant in a multiemployer plan (within the meaning of section 414(f)) is not treated as having incurred a severance from employment with the employer maintaining the multiemployer plan for purposes of this section and §§1.415(b)-1, 1.415(b)-2, 1.415(c)-1, 1.415(c)-2, 1.415(d)-1, 1.415(f)-1, 1.415(g)-1, and 1.415(j)-1 if the participant continues to be an employee of another employer maintaining the multiemployer plan.
Except as provided in paragraph (g) of this section (regarding multiemployer plans), and taking into account the rules of paragraph (b)(2) (regarding the break-up of affiliated employers and affiliated service groups), paragraph (c) (regarding predecessor employers), and paragraph (d)(1) (regarding nonduplication rules) of this section, section 415(f) and this section require that for purposes of applying the limitations of sections 415(b) and (c) applicable to a participant for a particular limitation year --
(1) All defined benefit plans (without regard to whether a plan has been terminated) ever maintained by the employer (or a predecessor employer within the meaning of paragraph (c) of this section) under which the participant has ever accrued a benefit are treated as one defined benefit plan,
(2) All defined contribution plans (without regard to whether a plan has been terminated) ever maintained by the employer (or a predecessor employer within the meaning of paragraph (c) of this section) under which the participant receives annual additions are treated as one defined contribution plan; and
(3) All section 403(b) annuity contracts purchased by an employer (including plans purchased through salary reduction contributions) for the participant are treated as one section 403(b) annuity contract.
See § 1.415(a)- 1(f)(1) and (2) for rules regarding aggregation of employers in the case of affiliated employers and affiliated service groups. See § 1.415(a)-1(f)(3) for rules regarding the treatment of leased employees.
A formerly affiliated plan of an employer is taken into account for purposes of applying paragraph (a) of this section to the employer, but the formerly affiliated plan is treated as if it had terminated immediately prior to the cessation of affiliation with sufficient assets to pay benefit liabilities under the plan, and had purchased annuities to provide plan benefits. See § 1.415(b)-1(b)(5)(i) for rules determining annual benefits under a terminated defined benefit plan under which annuities are purchased to provide plan benefits.
For purposes of this paragraph (b)(2), a formerly affiliated plan of an employer is a plan that, immediately prior to the cessation of affiliation, was actually maintained by one or more of the entities that constitute the employer (as determined under the employer affiliation rules described in § 1.415(a)-1(f)(1) and (2)), and immediately after the cessation of affiliation, is not actually maintained by any of the entities that constitute the employer (as determined under the employer affiliation rules described in § 1.415(a)-1(f)(1) and (2)). For purposes of this paragraph (b)(2), a cessation of affiliation means the event that causes an entity to no longer be aggregated with one or more other entities as a single employer under the employer affiliation rules described in § 1.415(a)-1(f)(1) and (2) (such as the sale of a subsidiary outside a controlled group), or that causes a plan to not actually be maintained by any of the entities that constitute the employer under the employer affiliation rules of § 1.415(a)-1(f)(1) and (2) (such as a transfer of plan sponsorship outside of a controlled group).
For purposes of section 415 and regulations promulgated under section 415, a former employer is a predecessor employer with respect to a participant in a plan maintained by an employer if the employer maintains a plan under which the participant had accrued a benefit while performing services for the former employer (for example, the employer assumed sponsorship of the former employer's plan, or the employer's plan received a transfer of benefits from the former employer's plan), but only if that benefit is provided under the plan maintained by the employer. In such a case, in applying the limitations of section 415 to a participant in a plan maintained by the employer, paragraph (a) of this section requires the plan to take into account benefits provided to the participant under plans that are maintained by the predecessor employer and that are not maintained by the employer. For this purpose, the formerly affiliated plan rules in paragraph (b)(2) of this section apply as if the employer and predecessor employer constituted a single employer under the rules described in § 1.415(a)-1(f)(1) and (2) immediately prior to the cessation of affiliation (and as if they constituted two, unrelated employers under the rules described in § 1.415(a)-1(f)(1) and (2) immediately after the cessation of affiliation) and cessation of affiliation was the event that gives rise to the predecessor employer relationship, such as a transfer of benefits or plan sponsorship.
With respect to an employer of a participant, a former entity that antedates the employer is a predecessor employer with respect to the 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. This will occur, for example, where formation of the employer constitutes a mere formal or technical change in the employment relationship and continuity otherwise exists in the substance and administration of the business operations of the former entity and the employer.
In applying the limitations of section 415 to a plan maintained by an employer, if the plan is aggregated with another plan pursuant to the aggregation rules of paragraph (a) of this section, a participant's benefits are not counted more than once in determining the participant's aggregate annual benefit or annual additions. For example, if a defined benefit plan is treated as if it terminated immediately prior to a cessation of affiliation under paragraph (b)(2) of this section, the plans maintained by the employer (as determined after the cessation of affiliation) that actually maintains the plan do not double count the annual benefit provided under the plan by aggregating under paragraph (a) of this section both the participant's annual benefit provided under the plan and the participant's annual benefit under the plan as a formerly affiliated plan (which is a plan that the employers formerly affiliated with the employer must take into account as a terminated plan under the rules of paragraph (b)(2) of this section). Instead, the plans maintained by the employer include the annual benefit provided to the participant under the actual plan that the employer maintains. Similarly, if a defined benefit plan maintained by an employer (the transferee plan) receives a transfer of benefits from a defined benefit plan maintained by a predecessor employer (the transferor plan) and the transfer is described in § 1.415(b)-1(b)(3)(i)(B) (which requires the transferred benefits to be treated by the transferor plan as if the benefits were provided under a plan that must be aggregated with the transferor plan that terminated immediately prior to the transfer), the transferee plan does not double count the transferred benefits under paragraph (a) of this section by taking into account both the actual benefit provided under the transferee plan and the benefit provided under the deemed terminated plan that the predecessor employer is treated as maintaining (and that otherwise would have to be taken into account by the transferee plan under the predecessor employer aggregation rules of paragraph (a) of this section). Instead, the transferee plan takes into account the transferred benefits that are actually provided under the transferee plan (see § 1.415(b)-1(b)(3)(i)(C)) and, pursuant to paragraph (c)(1) of this section, any nontransferred benefits provided under plans maintained by the predecessor employer with respect to a participant whose benefits have been transferred to the transferee plan.
If two or more defined benefit plans are aggregated under section 415(f) and this section for a particular limitation year, in applying the reduction for participation of less than ten years (as described in section 415(b)(5)(A)) to the dollar limitation under section 415(b)(1)(A), time periods that are counted as years of participation under any of the plans are counted in computing the limitation of the aggregated plans under this section.
If two or more defined benefit plans are aggregated under section 415(f) and this section for a particular limitation year, in applying the reduction for service of less than ten years (as described in section 415(b)(5)(B)) to the compensation limitation under section 415(b)(1)(B), time periods that are counted as years of service under any of the plans are counted in computing the limitation of the aggregated plans under this section.
This paragraph (e) provides rules for those situations in which two or more existing plans, which previously were not required to be aggregated pursuant to section 415(f) and this section, are aggregated during a particular limitation year and, as a result, the limitations of section 415(b) or (c) are exceeded for that limitation year. Paragraph (e)(2) of this section provides rules for defined contribution plans that are first required to be aggregated pursuant to section 415(f) and this section in a plan year. Paragraph (e)(3) of this section provides rules for defined benefit plans that are first required to be aggregated pursuant to section 415(f) and this section, and for defined benefit plans under which a participant's benefit is frozen following aggregation.
Two or more defined contribution plans that are not required to be aggregated pursuant to section 415(f) and this section as of the first day of a limitation year do not fail to satisfy the requirements of section 415 with respect to a participant for the limitation year merely because they are aggregated later in that limitation year, provided that no annual additions are credited to the participant's account after the date on which the plans are required to be aggregated.
Two or more defined benefit plans that are not required to be aggregated pursuant to section 415(f) and this section as of the first day of a limitation year do not fail to satisfy the requirements of section 415 for the limitation year merely because they are aggregated later in that limitation year, provided that no plan amendments increasing benefits with respect to the participant under either plan are made after the occurrence of the event causing the plan to be aggregated.
Two or more defined benefit plans that are required to be aggregated pursuant to section 415(f) and this section during a limitation year subsequent to the limitation year during which the plans were first aggregated do not fail to satisfy the requirements of section 415 with respect to a participant for the limitation year merely because they are aggregated if there have been no increases in the participant's accrued benefit derived from employer contributions (including increases as a result of increased compensation or service) under any of the plans within the period during which the plans have been aggregated.
In the case of a section 403(b) annuity contract, except as provided in paragraph (f)(2) of this section, the participant on whose behalf the annuity contract is purchased is considered for purposes of section 415 to have exclusive control of the annuity contract. Accordingly, except as provided in paragraph (f)(2) of this section, the participant, and not the participant's employer who purchased the section 403(b) annuity contract, is deemed to maintain the annuity contract, and such a section 403(b) annuity contract is not aggregated with a qualified plan that is maintained by the participant's employer.
Where a participant on whose behalf a section 403(b) annuity contract is purchased is in control of any employer for a limitation year as defined in paragraph (f)(2)(ii) of this section (regardless of whether the employer controlled by the participant is the employer maintaining the section 403(b) annuity contract), the annuity contract for the benefit of the participant is treated as a defined contribution plan maintained by both the controlled employer and the participant for that limitation year. Accordingly, where a participant on whose behalf a section 403(b) annuity contract is purchased is in control of any employer for a limitation year, the section 403(b) annuity contract is aggregated with all other defined contribution plans maintained by that employer. In addition, in such a case, the section 403(b) annuity contract is aggregated with all other defined contribution plans maintained by the employee or any other employer that is controlled by the employee. Thus, for example, if a doctor is employed by a non-profit hospital to which section 501(c)(3) applies and which provides him with a section 403(b) annuity contract, and the doctor also maintains a private practice as a shareholder owning more than 50 percent of a professional corporation, then any qualified defined contribution plan of the professional corporation must be aggregated with the section 403(b) annuity contract for purposes of applying the limitations of section 415(c) and § 1.415(c)-1. For purposes of this paragraph (f)(2), it is immaterial whether the section 403(b) annuity contract is purchased as a result of a salary reduction agreement between the employer and the participant.
For purposes of paragraph (f)(2)(i) of this section, a participant is in control of an employer for a limitation year if, pursuant to § 1.415(a)-1(f)(1) and (2), a plan maintained by that employer would have to be aggregated with a plan maintained by an employer that is 100 percent owned by the participant. Thus, for example, if a participant owns 60 percent of the common stock of a corporation, the participant is considered to be in control of that employer for purposes of applying paragraph (f)(2)(i) of this section.
If a section 403(b) annuity contract is aggregated with a qualified plan of a controlled employer in accordance with paragraph (f)(2) of this section, the plans must satisfy the limitations of section 415(c) both separately and on an aggregate basis. In applying separately the limitations of section 415 to the qualified plan and to the section 403(b) annuity, compensation from the controlled employer may not be aggregated with compensation from the employer purchasing the section 403(b) annuity contract (that is without regard to § 1.415(c)-2(g)(3)).
Pursuant to section 415(f)(3)(B), multiemployer plans, as defined in section 414(f), are not aggregated with other multiemployer plans for purposes of applying the limits of section 415.
Notwithstanding the rule of § 1.415(a)-1(e), a multiemployer plan, as defined in section 414(f), is permitted to provide that only the benefits under that multiemployer plan that are provided by an employer are aggregated with benefits under plans maintained by that employer that are not multiemployer plans. If the multiemployer plan so provides then, where an employer maintains both a plan which is not a multiemployer plan and a multiemployer plan, only the benefits under the multiemployer plan that are provided by the employer are aggregated with benefits under the employer's plans other than multiemployer plans (in lieu of including benefits provided by all employers under the multiemployer plan pursuant to the generally applicable rule of § 1.415(a)-1(e)).
Pursuant to section 415(f)(3)(A), a multiemployer plan, as defined in section 414(f), is not combined or aggregated with any other plan that is not a multiemployer plan for purposes of applying the compensation limit of section 415(b)(1)(B) and § 1.415(b)-1(a)(1)(ii).
If a plan, annuity contract or arrangement is subject to a special limitation in addition to, or instead of, the regular limitations described in section 415(b) or (c), and is aggregated under this section with a plan which is subject only to the regular section 415(b) or (c) limitations, the following rules apply:
(1) Each plan, annuity contract or arrangement which is subject to a special limitation must meet its own applicable limitation and each plan subject to the regular limitations of section 415 must meet its applicable limitation.
(2) The limitation for the aggregated plans is the larger of the applicable limitations for the separate plans.
The following examples illustrate the rules of this section.
Except to the extent otherwise stated in an example, each entity is not and has
never been affiliated with another entity under the employer affiliation rules
of § 1.415(a)-1(f)(1) and (2), each entity has never maintained a qualified plan
(other than the plans specifically mentioned in the example), and the limitation
year for each qualified plan is the calendar year.
Example 1.
(i) Facts. M was formerly an employee of ABC Corporation and is currently an
employee of XYZ Corporation. ABC maintains a qualified defined benefit plan
(Plan ABC) and a qualified defined contribution plan in which M participates and
XYZ maintains a qualified defined benefit plan (Plan XYZ) and a qualified
defined contribution plan in which M participates. ABC Corporation owns 60
percent of XYZ Corporation.
(ii) Treatment as a single employer. ABC Corporation and XYZ
Corporation are members of a controlled group of corporations within the meaning
of section 414(b) as modified by section 415(h). Because ABC Corporation and XYZ
Corporation are members of a controlled group of corporations within the meaning
of section 414(b) as modified by section 415(h), M is treated as being employed
by a single employer under § 1.415(a)-1(f)(1).
(iii) Plan aggregation. Under paragraph (a)(1) of this
section, the sum of M's annual benefit under Plan ABC and M's annual benefit
under Plan XYZ is not permitted to exceed the limitations of section 415(b) and
§ 1.415(b)-1; and, under paragraph (a)(2) of this section, the sum of the annual
additions to M's account under the defined contribution plans maintained by ABC
and XYZ may not exceed the limitations of section 415(c) and § 1.415(c)-1. For
purposes of determining the limitations of section 415(b) and § 1.415(b)-1 for
the aggregated plans, a year of service for either employer is considered as a
year of service for purposes of § 1.415(b)-1(g)(2) (phase-in rules for the
compensation limit) and a year of participation under either plan is considered
as a year of participation for purposes of § 1.415(b)-1(g)(1) (phase-in rules
for the dollar limit).
Example 2.
(i) Facts. The facts are the same as in Example 1, except that ABC Corporation
and XYZ Corporation do not maintain defined contribution plans. In addition,
Participant O was formerly an employee of ABC Corporation and is currently an
employee of XYZ Corporation. Participant O has an accrued benefit under the ABC
Plan, but Participant O has no accrued benefit under the XYZ Plan. Effective
January 1, 2010, ABC Corporation sells all of its shares of stock of XYZ
Corporation to an unaffiliated entity, LMN Corporation (the 2010 stock sale).
After the 2010 stock sale, XYZ Corporation continues to maintain Plan XYZ. LMN
Corporation maintains a qualified defined benefit plan (Plan LMN). After the
2010 stock sale, M begins to accrue benefits under Plan LMN, but O does not
participate in Plan LMN.
(ii) Affiliated employer status of the corporations.
Immediately after the 2010 stock sale, ABC Corporation and XYZ Corporation are
no longer members of a controlled group of corporations under section 414(b) (as
modified by section 414(h)) and accordingly are no longer treated as a single
employer under the employer affiliation rules of § 1.415(a)-1(f)(1). Immediately
after the 2010 stock sale, LMN Corporation and XYZ Corporation are members of a
controlled group of corporations under section 414(b) (as modified by section
414(h)) and accordingly are treated as a single employer under the employer
affiliation rules of § 1.415(a)-1(f)(1).
(iii) Treatment of plans maintained by ABC Corporation after
the 2010 stock sale. Under § 1.415(a)-1(f)(1), any plan maintained by any member
of a controlled group of corporations is deemed maintained by all members of the
controlled group, and paragraph (a)(1) of this section requires that, for
purposes of applying the limitations of section 415(b), all defined benefit
plans ever maintained by an employer (as determined under the affiliation rules
of § 1.415(a)-1(f)(1) and (2)) are treated as one defined benefit plan.
Therefore, defined benefit plans maintained by ABC Corporation must take into
account the annual benefit of a participant provided under Plan XYZ in applying
the limitations of section 415(b) to the participant because Plan XYZ is a plan
that had once been maintained by ABC Corporation. However, beginning with the
2010 limitation year, the aggregation of the annual benefit accrued by a
participant under Plan XYZ for purposes of testing defined benefit plans
maintained by ABC Corporation is limited to the annual benefit accrued by the
participant under Plan XYZ immediately prior to the 2010 stock sale. This is
because paragraph (b)(2)(i) of this section provides that a formerly affiliated
plan of an employer is treated as if it had terminated immediately prior to the
cessation of affiliation with sufficient assets to pay benefit liabilities under
the plan, and had purchased annuities to provide plan benefits. The 2010 stock
sale is a cessation of affiliation under paragraph (b)(2)(ii) of this section
because this event caused XYZ Corporation to no longer be affiliated with ABC
Corporation under the employer affiliation rules of § 1.415(a)-1(f)(1) and (2).
Immediately after the 2010 stock sale, Plan XYZ is a formerly affiliated plan
with respect to ABC Corporation under paragraph (b)(2)(ii) of this section
because immediately prior to the cessation of affiliation, Plan XYZ was actually
maintained by XYZ Corporation (which together with ABC Corporation constituted a
single employer under the employer affiliation rules of § 1.415(a)-1(f)(1) and
(2)), and immediately after the cessation of affiliation, Plan XYZ is not
actually maintained by ABC Corporation or any other entity affiliated with it.
(iv) Application of rules to Participants M and O with respect
to plans maintained by ABC Corporation after the 2010 stock sale. In applying
the limitations of section 415(b) to Participant M for the 2010 limitation year
and later limitation years, Plan ABC must take into account the annual benefit
provided under Plan ABC to Participant M and the annual benefit provided under
Plan XYZ to Participant M, but treating Plan XYZ as if it had terminated
immediately prior to the 2010 stock sale with sufficient assets to pay benefit
liabilities under the plan, and had purchased annuities to provide plan
benefits. The aggregation of Plan XYZ with Plan ABC is irrelevant for purposes
of Participant O because Participant O does not have any accrued benefit under
Plan XYZ (as determined prior to the 2010 stock sale).
(v) Treatment of plans maintained by LMN Corporation and XYZ
Corporation after the 2010 stock sale. Under § 1.415(a)- 1(f)(1) and paragraph
(a)(1) of this section, when applying the limitations of section 415(b) to a
participant under Plans LMN and XYZ for the 2010 limitation year and later
years, the annual benefit provided to the participant under Plans LMN, XYZ and
ABC must be aggregated. Benefits under Plan ABC must be included in this
aggregation because XYZ Corporation is deemed to have once maintained Plan ABC
pursuant to § 1.415(a)-1(f)(1), and since LMN Corporation and XYZ Corporation
constitute a single employer under § 1.415(a)-1(f)(1), paragraph (a)(1) of this
section requires the aggregation of all defined benefit plans ever maintained by
LMN Corporation and XYZ Corporation. However, in performing this aggregation, a
participant's annual benefit under Plan ABC is limited to the annual benefit
accrued by the participant immediately prior to the 2010 stock sale. This is
because, pursuant to paragraph (b)(2)(i) of this section, Plan ABC is a formerly
affiliated plan of LMN Corporation and XYZ Corporation.
(vi) Application of rules to Participants M and O with respect
to plans maintained by LMN Corporation and XYZ Corporation after the 2010 stock
sale. In applying the limitation of section 415(b) to Participant M for the 2010
limitation year and later limitation years, Plan LMN and Plan XYZ must take into
account the annual benefit provided under Plans LMN and XYZ to Participant M and
the annual benefit provided under Plan ABC to Participant M as if Plan ABC had
terminated immediately prior to the 2010 stock sale with sufficient assets to
pay benefit liabilities under the plan, and had purchased annuities to provide
plan benefits. Participant O does not have an accrued benefit under Plan LMN or
Plan XYZ, so the aggregation of Plan ABC with Plans LMN and XYZ is currently
irrelevant with respect to Participant O. However, if Participant O were to ever
participate in Plans LMN or XYZ after the 2010 stock sale, Participant O's
annual benefit under Plan ABC (determined as if Plan ABC terminated immediately
prior to the 2010 stock sale) would have to be aggregated with any annual
benefit that Participant O accrues under Plan LMN or Plan XYZ.
(vii) Application of nonduplication rule. In applying
paragraph (a)(1) of this section to plans maintained by ABC Corporation after
2010 stock sale, plans maintained by ABC Corporation do not take into account
the deemed termination of Plan ABC since ABC Corporation maintains Plan ABC
after the cessation of affiliation. Similarly, in applying paragraph (a)(1) of
this section to plans maintained by LMN Corporation and XYZ Corporation after
the 2010 stock sale, plans maintained by LMN Corporation and XYZ Corporation do
not take into account the deemed termination of Plan XYZ since XYZ Corporation
maintains Plan XYZ after the cessation of affiliation. See paragraph (d)(1) of
this section.
Example 3.
(i) Facts. The facts are the same as in Example 2, except that on January 1,
2009, Plan ABC transfers Participant M's benefit to Plan XYZ.
(ii) Treatment of plans maintained by ABC Corporation.
Pursuant to § 1.415(b)-1(b)(3)(i)(A), M's benefit that is transferred from Plan
ABC to Plan XYZ is not treated as being provided under Plan ABC for the
limitation year in which the transfer occurs (2009). This is because M's
transferred benefit is otherwise required to be taken into account by Plan ABC
for the 2009 limitation year since Plan XYZ must be aggregated with Plan ABC
pursuant to paragraph (a)(1) of this section. This result does not change for
the 2010 limitation year and later limitation years, where pursuant to paragraph
(b)(2)(i) of this section, Plan XYZ becomes a formerly affiliated plan with
respect to ABC Corporation due to the 2010 stock sale. Under paragraph (b)(2)(i)
of this section, Plan XYZ (the formerly affiliated plan) is treated from the
perspective of plans maintained by ABC Corporation (Plan ABC) as if Plan XYZ
terminated immediately prior to the 2010 stock sale with sufficient assets to
pay benefit liabilities under the plan, and had purchased annuities to provide
plan benefits. However, the pre-2010 stock sale benefits of Plan XYZ include the
January 1, 2009, transfer of Participant M's benefit. Thus, in the 2010
limitation year, M's transferred benefit is still otherwise required to be taken
into account by Plan ABC on account of the aggregation of Plan XYZ with Plan ABC
pursuant to paragraph (a)(1) of this section, and therefore the transferred
benefit is not treated as being provided by Plan ABC.
(iii) Treatment of plans maintained by LMN Corporation and XYZ
Corporation. Pursuant to § 1.415(b)-1(b)(3)(i)(C), Participant M's benefit that
is transferred to Plan XYZ from Plan ABC must be treated as provided under Plan
XYZ for purposes of applying the limitations of section 415 to Plan XYZ with
respect to Participant M for the limitation year in which the transfer occurs
and later years. This result does not change on account of the 2010 stock sale.
When applying the limitation of section 415 to Plans LMN and XYZ for the 2010
limitation year and later years, Plans LMN and XYZ must aggregate the annual
benefit provided to a participant under each plan along with the participant's
benefit under Plan ABC pursuant to § 1.415(a)-1(f)(1) and paragraph (a)(1) of
this section. However, under paragraph (b)(2)(i) of this section, for the 2010
limitation year and later years, this aggregation of M's Plan ABC benefit only
includes the annual benefit attributable to a participant's accrued benefit
under Plan ABC immediately prior to the 2010 stock sale, which (due to the 2009
transfer) is zero.
Example 4.
(i) Facts. The facts are the same as in Example 2, except that on January 1,
2011, Plan ABC transfers Participant M's benefit to Plan XYZ.
(ii) Treatment of plans maintained by ABC Corporation for the
2011 limitation year and later years. Pursuant to § 1.415(b)- 1(b)(3)(i)(B), M's
benefit that is transferred from Plan ABC to Plan XYZ during the 2011 limitation
year is treated by Plan ABC for the 2011 limitation year and later years as if
the transferred benefit were provided under a plan that must be aggregated with
Plan ABC that terminated immediately prior to the transfer with sufficient
assets to pay benefit liabilities under the plan, and had purchased annuities to
provide plan benefits. This is because M's transferred benefit is not otherwise
required to be taken into account by Plan ABC for the 2011 limitation year and
later years pursuant to paragraphs (a)(1) and (b)(2)(i) of this section. While
Plan ABC must take into account Participant M's annual benefit under Plan XYZ
under paragraph (a)(1) of this section, Participant M's annual benefit for this
purpose is limited under paragraph (b)(2)(i) of this section to M's accrued
benefit under Plan XYZ immediately prior to the 2010 stock sale, and Participant
M's pre-2010 stock sale accrued benefit under Plan XYZ excludes the 2011
transfer.
(iii) Treatment of plans maintained by LMN Corporation and XYZ
Corporation for the 2011 limitation year and later years. Pursuant to §
1.415(b)-1(b)(3)(i)(C), Participant M's benefit that is transferred to Plan XYZ
from Plan ABC must be treated as provided under Plan XYZ for purposes of
applying the limitations of section 415 to Plan XYZ with respect to Participant
M for the limitation year in which the transfer occurs and later years. In
applying the limitations of section 415(b) to Plans LMN and XYZ with respect to
Participant M for the 2010 limitation year and later years, the annual benefit
of Participant M under Plans ABC, LMN, and XYZ must be aggregated pursuant to §
1.415(a)-1(f)(1) and paragraph (a)(1) of this section, but for this purpose,
Participant M's benefit under Plan ABC is treated as if it were provided under a
plan that terminated immediately prior to the cessation of affiliation of ABC
Corporation and XYZ Corporation with sufficient assets to pay benefit
liabilities under the plan, and had purchased an annuity to provide Participant
M's benefits. (See paragraph (b)(2)(i) of this section and Example 2.) In
applying the limitations of section 415(b) to Plans LMN and XYZ with respect to
Participant M for the 2011 limitation year and later years, the annual benefit
of Participant M under Plans ABC, LMN, and XYZ still must be aggregated pursuant
to § 1.415(a)-1(f)(1) and paragraph (a)(1) of this section. However, beginning
with the 2011 limitation year, ABC Corporation is a predecessor employer with
respect to LMN Corporation and XYZ Corporation with respect to Participant M on
account of the transfer of benefits from Plan ABC to Plan XYZ, pursuant to
paragraph (c)(1) of this section. Therefore, Plans LMN and XYZ must take into
account benefits that Participant M accrued under Plan ABC after the January 1,
2010, cessation of affiliation of ABC Corporation and XYZ Corporation that were
not transferred to Plan XYZ on January 1, 2011, pursuant to paragraphs (c)(1)
and (d)(1) of this section. Since all of Participant M's benefit in Plan ABC is
transferred to Plan XYZ on January 1, 2011, Participant M's annual benefit from
Plan ABC for purposes of aggregating Plan ABC with Plans LMN and XYZ is zero.
Example 5.
(i) Facts. The facts are the same as in Example 2, except that instead of the
2010 stock sale, XYZ Corporation sells some of its operating assets to LMN
Corporation (and, under the facts and circumstances, the sale does not result in
XYZ Corporation constituting a predecessor employer of LMN Corporation under the
rules of paragraph (c)(2) of this section), and in connection with the asset
sale, LMN Corporation assumes sponsorship of Plan XYZ in place of XYZ
Corporation, effective January 1, 2010.
(ii) Treatment of plans maintained by ABC Corporation and XYZ
Corporation. Pursuant to paragraph (a)(1) of this section, all defined benefit
plans ever maintained by ABC Corporation and XYZ Corporation must be aggregated
as a single defined benefit plan for purposes of applying the limitations of
section 415(b). However, for purposes of determining the annual benefit under
Plan XYZ for the 2010 limitation year and later years, the aggregation of a
participant's benefit under Plan XYZ is limited to the participant's annual
benefit accrued immediately prior to the January 1, 2010, transfer of
sponsorship of Plan XYZ. This is because paragraph (b)(2)(i) of this section
provides that a formerly affiliated plan of an employer is treated as if it were
a plan that terminated immediately prior to the cessation of affiliation with
sufficient assets to pay benefit liabilities under the plan, and had purchased
annuities to provide plan benefits. The January 1, 2010, transfer of sponsorship
of Plan XYZ is a cessation of affiliation under paragraph (b)(2)(ii) of this
section because this event causes Plan XYZ to no longer actually be maintained
by either ABC Corporation or XYZ Corporation. Effective immediately after the
January 1, 2010, transfer of sponsorship, Plan XYZ is a formerly affiliated plan
with respect to ABC Corporation and XYZ Corporation under paragraph (b)(2)(ii)
of this section because immediately prior to the cessation of affiliation, Plan
XYZ was actually maintained by XYZ Corporation, and immediately after the
cessation of affiliation, Plan XYZ is not actually maintained by either XYZ
Corporation or ABC Corporation. Therefore, in applying the limitation of section
415(b) to Participant M for the 2010 limitation year and later limitation years,
Plan ABC must take into account the annual benefit provided under Plan ABC to
Participant M and the annual benefit provided under Plan XYZ to Participant M as
if Plan XYZ had terminated immediately prior to the 2010 stock sale with
sufficient assets to pay benefit liabilities under the plan, and had purchased
annuities to provide plan benefits. The aggregation of Plan XYZ with Plan ABC is
irrelevant for purposes of Participant O because Participant O does not have any
accrued benefit under Plan XYZ (as determined prior to the 2010 transfer of
sponsorship).
(iii) Treatment of plans maintained by LMN Corporation. Under
paragraph (a)(1) of this section, all defined benefit plans ever maintained by
LMN Corporation or a predecessor employer must be aggregated as a single plan
for purposes of applying the limitations of section 415(b). ABC Corporation and
XYZ Corporation constitute a predecessor employer pursuant to paragraph (c)(1)
of this section with respect to the participants who participate in Plan XYZ on
the date of the transfer of sponsorship of Plan XYZ (the transferred
participants) from XYZ Corporation to LMN Corporation, such as Participant M.
This is because, effective with the January 1, 2010, transfer of sponsorship,
LMN Corporation maintains a plan (Plan XYZ) under which the participants accrued
a benefit while performing services for XYZ Corporation (which is in turn
affiliated with ABC Corporation under § 1.415(a)-1(f)(1)) and such benefits are
provided under a plan maintained by LMN Corporation. Therefore, for the 2010
limitation year and later years, the annual benefit under Plan ABC of the
transferred participants (such as Participant M) must be aggregated with the
annual benefit provided to such participants under Plans XYZ and LMN for
purposes of determining whether Plan LMN or Plan XYZ satisfies the limitations
of section 415(b). However, the aggregation of the transferred participants'
Plan ABC annual benefits is limited to the annual benefit accrued under Plan ABC
immediately prior to January 1, 2010, transfer of sponsorship. This is because,
pursuant to paragraph (c)(1) of this section, Plan ABC is treated from the
perspective of plans maintained by LMN Corporation as if Plan ABC had terminated
immediately prior to the transfer of sponsorship of Plan ABC to LMN Corporation
with sufficient assets to pay benefit liabilities under the plan, and had
purchased annuities to provide plan benefits. ABC Corporation and XYZ
Corporation do not constitute a predecessor employer with respect to Participant
O. Thus, if Participant O is a participant in Plan LMN or becomes a participant
in Plan XYZ after the 2010 transfer of sponsorship, neither plan aggregates
Participant O's Plan ABC benefits for purposes of satisfying section 415(b). In
applying paragraph (a)(1) of this section to a participant, plans maintained by
LMN Corporation do not double count the participant's annual benefit. See
paragraph (d)(1) of this section. Thus, such plans do not aggregate the annual
benefit provided under Plan XYZ with the annual benefit from the deemed
termination of Plan XYZ that LMN Corporation's predecessor employer (which is
ABC and XYZ Corporations) must take into account in applying paragraph (a)(1) of
this section, and instead consider the annual benefit actually provided under
Plan XYZ.
Example 6.
(i) Facts. N is employed by a hospital which purchases an annuity contract
described in section 403(b) on N's behalf for the current limitation year. N is
in control of the hospital within the meaning of section 414(b) or (c), as
modified by section 415(h). The hospital also maintains a qualified defined
contribution plan during the current limitation year in which N participates.
(ii) Conclusion. Under section 415(k)(4), the hospital, as
well as N, is considered to maintain the annuity contract. Accordingly, for N
the sum of the annual additions under the qualified defined contribution plan
and the annuity contract must satisfy the limitations of section 415(c) and §
1.415(c)-1.
Example 7.
(i) Facts. The facts are the same as in Example 6, except that instead of being
in control of the hospital, N is the 100 percent owner of a professional
corporation P, which maintains a qualified defined contribution plan in which N
participates.
(ii) Conclusion. Under section 415(k)(4), the professional
corporation, as well as N, is considered to maintain the annuity contract.
Accordingly, the sum of the annual additions under the qualified defined
contribution plan maintained by professional corporation P and the annuity
contract must satisfy the limitations of section 415(c) and § 1.415(c)-1. See §
1.415(g)- 1(b)(3)(iv)(C)(2) for an example of the treatment of a contribution to
a section 403(b) annuity contract that exceeds the limits of section 415(c) by
reason of the aggregation required by this section.
Example 8.
(i) Facts. J is an employee of two corporations, N and M, each of which has
employed J for more than 10 years. N and M are not required to be aggregated
pursuant to section 415(f) and this section. Each corporation has a qualified
defined benefit plan in which J has participated for more than 10 years. Each
plan provides a benefit which is equal to 75 percent of a participant's average
compensation for the period of the participant's high-3 years of service and is
payable in the form of a straight life annuity beginning at age 65. J's average
compensation for the period of his high-3 years of service from each corporation
is $160,000. In July 2008, N Corporation becomes a wholly owned subsidiary of M
Corporation.
(ii) Plan aggregation analysis. As a result of the acquisition
of N Corporation by M Corporation, J is treated as being employed by a single
employer under section 414(b). Therefore, because section 415(f)(1)(A) requires
that all defined benefit plans of an employer be treated as one defined benefit
plan, the two plans must be aggregated for purposes of applying the limitations
of section 415. However, under paragraph (e)(3)(i) of this section, since the
plans were not aggregated as of the first day of the 2008 limitation year
(January 1, 2008), they will not be considered aggregated until the limitation
year beginning January 1, 2009, provided that no plan amendment increasing
benefits with respect to participant J is made after the acquisition of N by M.
(iii) Application to Participant J. J has a total benefit
under the two plans of $240,000, which, as a result of the plan aggregation, is
in excess of the section 415(b) limit. However, under paragraph (e)(3)(ii) of
this section, the limitations of section 415(b) and § 1.415(b)-1 applicable to J
may be exceeded in this situation without plan disqualification so long as J's
accrued benefit derived from employer contributions is not increased (that is,
J's accrued benefit does not increase on account of increased compensation,
service, participation, or other accruals) during the period within which the
limitations are being exceeded.
Example 9.
(i) Facts. A, age 30, owns all of the stock of X Corporation and also owns 10
percent of the stock of Z Corporation. F, A's father, directly owns 75 percent
of the stock of Z Corporation. Both corporations have qualified defined
contribution plans in which A participates. A's compensation (within the meaning
of § 1.415(c)-2) for 2008 is $20,000 from Z Corporation and $150,000 from X
Corporation. During the period January 1, 2008 through June 30, 2008, annual
additions of $20,000 are credited to A's account under the plan of Z
Corporation, while annual additions of $40,000 are credited to A's account under
the plan of X Corporation. In both instances, the amount of annual additions
represent the maximum allowable under section 415(c) and § 1.415(c)-1. On July
15, 2008, F dies, and A inherits all of F's stock in Z in 2008.
(ii) Conclusion. As of July 15, 2008, A is considered to be in
control of X and Z Corporations, and the two plans must be aggregated for
purposes of applying the limitations of section 415. However, even though A's
total annual additions for 2008 are $60,000, the limitations of section 415(c)
and § 1.415(c)-1 are not violated for 2008, provided no annual additions are
credited to A's accounts after July 15, 2008 (the date that A is first in
control of Z) for the remainder of the 2008 limitation year.
Example 10.
(i) Facts. P is a key employee of employer XYZ who participates in a qualified
defined contribution plan (Plan X). P is also provided post-retirement medical
benefits, and XYZ has taken into account a reserve for those benefits under
section 419A(c)(2). In the 2008 limitation year, P's compensation is $30,000 and
P's annual additions under Plan X are $5,000. Pursuant to section 419A(d), a
separate account is maintained for P, and that account is credited with an
allocation of $32,000 for the 2008 limitation year. It is assumed that the
section 415(c)(1)(A) dollar limit for 2008 is $46,000.
(ii) Separate testing analysis. Under paragraph (h)(1) of this
section, Plan X and the individual medical account must separately satisfy the
requirements of section 415(c), taking into account any special limit applicable
to that arrangement. In this case, the contributions to Plan X separately
satisfy the limitations of section 415(c). While the individual medical account
is treated as a defined contribution plan subject to the rules of section
415(c), it is not subject to the 100 percent of compensation limit of section
415(c)(1)(B), so the contributions to that account satisfy the limitations of
section 415(c).
(iii) Aggregation analysis. The sum of the annual additions
under Plan X and the amounts contributed to the separate account on P's behalf
must satisfy the requirements of section 415(c). Under paragraph (h)(2) of this
section, the limit applicable to the aggregated plan is equal to the greater of
the limits applicable to the separate plans. In this case, the limit applicable
to the medical account is $46,000 (which is greater than the limit of $30,000
applicable to the qualified plan), so the limit that applies to the aggregated
plan is $46,000, and the aggregated plan satisfies the requirements of section
415.