Page:United States Statutes at Large Volume 120.djvu/1071

 120 STAT. 1040

PUBLIC LAW 109–280—AUG. 17, 2006

SEC. 903. TREATMENT OF ELIGIBLE COMBINED DEFINED BENEFIT PLANS AND QUALIFIED CASH OR DEFERRED ARRANGEMENTS. 26 USC 414.

Applicability.

VerDate 14-DEC-2004

10:20 Jul 12, 2007

(a) AMENDMENTS OF INTERNAL REVENUE CODE.—Section 414 of the Internal Revenue Code of 1986, as amended by this Act, is amended by adding at the end the following new subsection: ‘‘(x) SPECIAL RULES FOR ELIGIBLE COMBINED DEFINED BENEFIT PLANS AND QUALIFIED CASH OR DEFERRED ARRANGEMENTS.— ‘‘(1) GENERAL RULE.—Except as provided in this subsection, the requirements of this title shall be applied to any defined benefit plan or applicable defined contribution plan which are part of an eligible combined plan in the same manner as if each such plan were not a part of the eligible combined plan. ‘‘(2) ELIGIBLE COMBINED PLAN.—For purposes of this subsection— ‘‘(A) IN GENERAL.—The term ‘eligible combined plan’ means a plan— ‘‘(i) which is maintained by an employer which, at the time the plan is established, is a small employer, ‘‘(ii) which consists of a defined benefit plan and an applicable defined contribution plan, ‘‘(iii) the assets of which are held in a single trust forming part of the plan and are clearly identified and allocated to the defined benefit plan and the applicable defined contribution plan to the extent necessary for the separate application of this title under paragraph (1), and ‘‘(iv) with respect to which the benefit, contribution, vesting, and nondiscrimination requirements of subparagraphs (B), (C), (D), (E), and (F) are met. For purposes of this subparagraph, the term ‘small employer’ has the meaning given such term by section 4980D(d)(2), except that such section shall be applied by substituting ‘500’ for ‘50’ each place it appears. ‘‘(B) BENEFIT REQUIREMENTS.— ‘‘(i) IN GENERAL.—The benefit requirements of this subparagraph are met with respect to the defined benefit plan forming part of the eligible combined plan if the accrued benefit of each participant derived from employer contributions, when expressed as an annual retirement benefit, is not less than the applicable percentage of the participant’s final average pay. For purposes of this clause, final average pay shall be determined using the period of consecutive years (not exceeding 5) during which the participant had the greatest aggregate compensation from the employer. ‘‘(ii) APPLICABLE PERCENTAGE.—For purposes of clause (i), the applicable percentage is the lesser of— ‘‘(I) 1 percent multiplied by the number of years of service with the employer, or ‘‘(II) 20 percent. ‘‘(iii) SPECIAL RULE FOR APPLICABLE DEFINED BENEFIT PLANS.—If the defined benefit plan under clause (i) is an applicable defined benefit plan as defined in section 411(a)(13)(B) which meets the interest credit requirements of section 411(b)(5)(B)(i), the plan shall

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