Comments With Respect to Prop. Treas. Reg. §§ 1.401(A)(4)-8(B)(1) and 9(B)(2)(V)
Governing So-Called “New Comparability Plans”
March 23, 2001

Contents | Introduction | Summary | I | II | III | IV | V

Summary of Issues Addressed and Recommendations
These Comments address the following issues and make the recommendations indicated:

1. Definition of Compensation

Could a plan use a “reasonable” compensation definition for the broadly available allocation rate test and minimum allocation gateway requirement, rather than being limited to the I.R.C. § 415(c)(3) definition of compensation?

We recommend that a plan be permitted to use a definition of “reasonable” compensation, such as that described in Reg. § 1.414(s)-1, for either the broadly available allocation rate test or the minimum allocation gateway requirement. This would include, but not be not limited to, a rate of compensation (such as base pay) that satisfies the “reasonable” compensation standard in the regulations.

2. Use of Combination of Age and Service in Determining “Broadly Available Allocation Rates”

Should a defined contribution plan be permitted to disregard age and service conditions in determining whether each allocation rate under the plan is currently available to a nondiscriminatory group of employees, if allocation rates under the plan’s allocation formula are determined using a schedule of rates that is based on a combination of age and service rather than solely on either age or service?

We suggest that allocation rates under a single schedule of rates be allowed to be based on a combination of age and service, rather than solely on age or service.

3. “Broadly Available Allocation” Rates Requirement

Could the goal of the broadly available allocation rates requirement test be met, and still give plan sponsors more flexibility in design, by limiting the banding test to egregious cases of discrimination?

We suggest that plan sponsors be given more flexibility in design of plans by limiting the banding test under the broadly available allocation rates requirement to egregious cases of discrimination, rather than by applying these requirements to all plans.

4. Target Benefit Plans

Should target benefit plans be deemed to satisfy the broadly available allocation rates requirement?

Yes. We recommend that target benefit plans be deemed to satisfy the broadly available allocation rates requirement.

5. “Primarily Defined Benefit” Test

What changes could be made to the “primarily defined benefit” test to simplify it without destroying its intended purpose?

We suggest that the criteria for determining whether a DB/DC plan is “primarily defined benefit” in character be revised to: (a) provide that a DB/DC plan satisfies the test for the “primarily defined benefit in character” requirement by showing that at least 50% of the NHCEs in the DB/DC plan earn a meaningful benefit under the DB part of the DB/DC plan, (b) disregard I.R.C. § 401(k) deferrals and § 401(m) contributions for this purpose, and (c) clarify that this requirement does not have to be satisfied if DB and DC plans are aggregated solely for the purpose of satisfying I.R.C. § 410(b).

Contents | Introduction | Summary | I | II | III | IV | V