[Federal Register Volume 59, Number 246 (Friday, December 23, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: X94-11223]


[[Page Unknown]]

[Federal Register: December 23, 1994]


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DEPARTMENT OF THE TREASURY
26 CFR Part 1

[TD 8581]
RIN 1545-AQ87

 

Certain Cash or Deferred Arrangements and Employee and Matching 
Contributions Under Employee Plans

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document amends final regulations governing certain cash 
or deferred arrangements and employee and matching contributions under 
employee plans. The amendments add cross-references to final 
regulations relating to nondiscrimination, minimum coverage, and 
related requirements, since the publication of the final regulations 
relating to cash or deferred arrangements and employee and matching 
contributions. The amendments also make various technical corrections 
to and clarifications of the final regulations governing cash or 
deferred arrangements and employee and matching contributions under 
employee plans, the final regulations relating to plan amendments 
reducing accrued benefits, and the final regulations relating to 
maximum contributions and benefits.

EFFECTIVE DATE: These regulations are effective August 15, 1991.

FOR FURTHER INFORMATION CONTACT: Catherine Livingston Fernandez at 202-
622-4606 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    Final regulations under sections 401(a)(30), 401(k), 401(m), 
402(a)(8), 402(g), 411(d)(6), 415(c), 416, and 4979 of the Internal 
Revenue Code (Code) were published in the Federal Register on August 
15, 1991 (56 FR 40507). Amendments to the final regulations were 
published in the Federal Register on December 4, 1991 (56 FR 63420). 
Minor corrections to the final regulations were published in the 
Federal Register on March 25, 1992 (57 FR 10289), on December 17, 1992 
(57 FR 59915), and on March 16, 1993 (58 FR 14150). The final 
regulations published on August 15, 1991, as amended and corrected on 
or before March 16, 1993, are referred to herein as ``the 1991 Final 
Regulations.''
    Proposed amendments to the 1991 Final Regulations were published in 
the Federal Register on August 10, 1992 (57 FR 35536), and on January 
4, 1993 (58 FR 43). A minor correction to the amendment proposed on 
January 4, 1993, was published in the Federal Register on March 22, 
1993 (58 FR 15312). The amendments made by this document include these 
previously proposed amendments.

Explanation of Provisions

1. Coordination With Regulations Under Sections 401(a)(4), 401(a)(17), 
410(b), and 414(s)

    Final regulations under section 401(a)(4) were published in the 
Federal Register on September 3, 1993 (58 FR 46773). Final regulations 
under section 401(a)(17) were published in the Federal Register on June 
27, 1994 (59 FR 32903). Final regulations under section 410(b) were 
published in the Federal Register on September 19, 1991 (56 FR 47638). 
Amendments to the regulations under section 410(b) were published in 
the Federal Register on December 4, 1991 (56 FR 63420), September 3, 
1993 (58 FR 46835), and June 27, 1994 (59 FR 32911). Final regulations 
under section 414(s) were published in the Federal Register on 
September 19, 1991 (56 FR 47659). Amendments to the regulations under 
section 414(s) were published in the Federal Register on September 7, 
1993 (58 FR 47061).
    A number of provisions of the final regulations under sections 
401(a)(4) and (17), 410(b), and 414(s) affect plans subject to the 
regulations governing cash or deferred arrangements and employee and 
matching contributions. The preamble to the 1991 Final Regulations 
states that ``when final regulations are issued under section 410(b), 
these [section 410(k) and (m)] regulations will be revised to cross-
refer to definitions of common applicability under sections 410(b), 
401(k), and 401(m).'' (56 FR 40507, 40511 (August 15, 1991)). 
Therefore, this document amends final regulations under sections 401(k) 
and (m), 402(g), and 4979 by inserting cross-references to the relevant 
provisions of the regulations under sections 401(a)(4) and (17), 
410(b), and 414(s).

2. Scope of These Amendments

    Questions and comments received with respect to the 1991 Final 
Regulations have suggested that some technical corrections or 
clarifications would be helpful. Accordingly, in addition to inserting 
cross-references as described above, the amendments made by this 
document (referred to herein as the 1994 Amendments) make a number of 
technical corrections and clarifications. More significant changes are 
beyond the scope of this package, but may be considered at a later 
date. Treasury and the IRS continue to welcome comments concerning the 
regulations.

3. Use of Term ``Section 401(k) Plan'' to Reflect Special 
Nondiscrimination Testing Requirements for QNECs Under Sections 
401(a)(4) and 410(b)

    Among the terms of common applicability under sections 410(b), 
401(k), and 401(m) is the term ``section 401(k) plan,'' which is 
defined in the regulations under sections 401(a)(4) and 410(b). Those 
regulations define a ``section 401(k) plan'' as consisting only of the 
elective contributions under a qualified cash or deferred arrangement 
(CODA). See Sec. 1.410(b)-9. Qualified nonelective contributions 
(QNECs) that are used to pass the actual deferral percentage (ADP) test 
are not treated as part of a section 401(k) plan under those 
regulations and must be tested separately for nondiscrimination under 
sections 401(a)(4) and 410(b). See Secs. 1.401(a)(4)-1(b)(2)(ii)(B) and 
1.410(b)-7(c)(1). Thus, while QNECs may be used to pass the ADP test 
(and in fact are included in the definition of a CODA under the section 
401(k) regulations at Sec. 1.401(k)-1(b)(4)), they are nonetheless part 
of a plan separate from the section 401(k) plan for purposes of section 
401(a)(4) and 410(b) testing.
    These 1994 Amendments incorporate the term ``section 401(k) plan'' 
(defined as described above) into several provisions of the 1991 Final 
Regulations. This is to reflect the requirement (which is unchanged by 
the 1994 Amendments) for separate testing of QNECs under sections 
401(a)(4) and 410(b). Except in the few places in these regulations 
where the term ``section 401(k) plan'' has been used, the regulations 
continue to use the existing term ``cash or deferred arrangement'' or 
``CODA'' with its current meaning. Thus, incorporation of the term 
``section 401(k) plan'' in selected provisions of the 1994 Amendments 
does not affect the testing requirements for qualified CODAs, including 
the two special nondiscrimination testing rules for QNECs in 
Sec. 1.401(k)-1(b)(5) (i) and (ii).
    Under the first of these tests, the QNECs used in the ADP test are 
aggregated with other nonelective contributions as they would be if 
they had not been used in the ADP test. In accordance with the final 
regulations under section 410(b), permitted disparity under section 
401(l) may be used to demonstrate that these plan contributions satisfy 
section 401(a)(4). Under the second test, only those QNECs that are not 
used in the ADP and actual contribution percentage (ACP) tests are 
taken into account, together with other nonelective contributions, in 
determining whether section 401(a)(4) is satisfied. Here too permitted 
disparity may be used.
    A similar term, ``section 401(m) plan,'' has been added by the 1994 
Amendments to reflect that QNECs used to pass the ACP test are part of 
a separate plan for purposes of the nondiscrimination testing required 
under sections 401(a)(4) and 410(b). Incorporation of the term 
``section 401(m) plan'' does not affect the testing requirements 
governing employee and matching contributions, including the two 
special nondiscrimination testing rules in Sec. 1.401(m)-1(b)(5) (i) 
and (ii) for QNECs used in the ACP test. These testing rules are 
similar to the special testing rules which apply to QNECs that are used 
in the ADP test. Thus under the first test, the QNECs used in the ACP 
test must be tested under section 401(a)(4) by aggregating them with 
other nonelective contributions. Under the second test, only those 
QNECs that are not used in the ACP and ADP tests are taken into 
account, together with other nonelective contributions, for section 
401(a)(4) testing purposes. Permitted disparity may also be used under 
both tests.
    As an additional matter, the 1994 Amendments specifically state the 
rule implicit in the 1991 Final Regulations that the same QNECs may not 
be used to satisfy both the ADP and the ACP tests. See Sec. 1.401(m)-
1(b)(4)(ii)(B).

4. Plans Benefiting Otherwise Excludable Employees

    Final regulations under section 410(b) permit separate testing of 
the portion of a plan benefiting employees who have not satisfied the 
greatest minimum age and service requirements permitted under section 
410(a). See Sec. 1.410(b)-6(b)(3). The 1994 Amendments make clear that 
a plan may separately test these employees under section 401 (k) or (m) 
without violating the 1991 Final Regulations' prohibition on 
restructuring, because this separate testing does not constitute 
restructuring within the meaning of the section 401(a)(4) regulations. 
Thus, an employer may treat a plan that benefits employees including 
otherwise excludable employees as two separate plans (one for the 
otherwise excludable employees and one for all other eligible 
employees) for purposes of sections 401 (k) and (m) and 410(b). See 
Secs. 1.401(k)-1(b)(3)(ii) and 1.401(m)-1(b)(3)(ii).

5. Retroactive Correction of Certain Defects

    The 1994 Amendments add references to Sec. 1.401(a)(4)- 
11(g)(3)(vii), which allows retroactive correction of certain 
prohibited discrimination in section 401 (k) and (m) plans. Section 
1.401(a)(4)-11(g)(3)(vii)(A) permits the sponsor of a section 401(k) or 
401(m) plan to amend the plan retroactively to satisfy the section 
410(b) minimum coverage requirements by allocating QNECs to nonhighly 
compensated employees who were not eligible under the plan. Section 
1.401(a)(4)-11(g)(3)(vii)(B) permits a plan to allocate QNECs to 
nonhighly compensated employees pursuant to a retroactive amendment in 
order to satisfy the nondiscriminatory current availability requirement 
of Sec. 1.401(a)(4)-4(b) with respect to the right to a rate of 
matching contributions. Since the amount of the added QNECs is based on 
the ADP or ACP of the group of nonhighly compensated employees who were 
eligible before the correction, the addition of these QNECs does not 
change the calculation of the ADP or ACP or the plan's compliance with 
the ADP or ACP requirements.
    Consistent with the limitations contained in the retroactive 
correction provisions of Sec. 1.401(a)(4)-11(g), the 1994 Amendments 
affirm that this section 401(a)(4) retroactive correction method cannot 
be used to correct excess contributions (amounts that exceed the limits 
under section 401(k)) or excess aggregate contributions (amounts that 
exceed the limits under section 401(m)). These contributions may be 
corrected only in accordance with Sec. 1.401(k)- 1(f)(1)(iii) or 
1.401(m)-1(e)(1)(iii), respectively. Similarly, excess deferrals 
(amounts that exceed the limits under section 402(g)) may be corrected 
only in accordance with Sec. 1.402(g)-1(e).

6. Distributions Upon Plan Termination

    Sections 401(k)(2)(B)(i)(II) and 401(k)(10)(A)(i) permit 
distributions from a qualified CODA after termination of the plan 
without the establishment or maintenance of a successor plan by the 
employer. Section 1.401(k)-1(d)(3) provides that if fewer than two 
percent of the employees who were eligible under the terminated defined 
contribution plan that included the CODA are eligible under another 
plan of the employer during a specified 24-month period, the other plan 
is not a successor plan. The 1994 Amendments clarify that the number of 
employees who were eligible under the terminated plan and the identity 
of the employer are determined as of the date of plan termination. See 
Rev. Rul. 89-87, 1989-2 C.B. 81, regarding the date of plan 
termination. Thus, for example, if a plan is terminated as of December 
31, 1994, and the plan assets are timely distributed thereafter, then 
the number of employees who were eligible under the plan is determined 
as of December 31, 1994. The clarifications of the language relating to 
these successor plan rules, including the two percent test, are not 
intended to change the rules governing that test in any way.

7. Other Benefits Not Contingent Upon Elective Contributions

    Section 401(k)(4)(A) and Sec. 1.401(k)-1(e)(6) of the 1991 Final 
Regulations provide that a CODA is a qualified CODA only if no other 
benefit (other than a matching contribution under section 401(m)) is 
conditioned (directly or indirectly) upon the employee's electing to 
make or not to make elective contributions. The 1994 Amendments add two 
examples to Sec. 1.401(k)-1(e)(6) to respond to frequent questions 
concerning the application of the contingent benefit rule to two 
specific arrangements involving relationships between a nonqualified 
deferred compensation plan and a qualified CODA. These examples 
illustrate the existing rules, and are not intended to change those 
rules in any way.

8. Coordination of Excess Deferrals With Excess Contributions

    The 1994 Amendments amend Example 2 in Sec. 1.402(g)-1(e)(11) to 
reflect more accurately the rules that coordinate the correction of 
excess deferrals and excess contributions. Under these rules, excess 
deferrals that have been distributed to a highly compensated employee 
serve the purpose of reducing the amount to be distributed as an excess 
deferral and excess contribution. See Secs. 1.401(k)- 1(f)(5); 
1.402(g)-1(e)(1)(ii). Conversely, excess contributions that have been 
distributed to a highly compensated employee reduce both the excess 
contribution and the amount to be distributed as an excess deferral. 
See Secs. 1.401(k)-1(f)(5); 1.402(g)-1(e)(6). The statement in Example 
2 that further correction was required to pass the ADP test under the 
facts of the example was inaccurate and has been deleted.

9. Distribution of Matching Contributions Related to Excess Deferrals, 
Excess Contributions, and Excess Aggregate Contributions

    Questions have been raised about the extent to which a matching 
contribution may be distributed if it relates to an amount that is 
distributed as an excess contribution, excess deferral, or excess 
aggregate contribution. Distribution of excess deferrals, excess 
contributions, or excess aggregate contributions may cause matching 
contributions related to the distributed amounts to be discriminatory 
by producing an effective rate of match that discriminates in favor of 
highly compensated employees. See Sec. 1.401(a)(4)-4(e)(3)(G).
    There are two circumstances under which a matching contribution may 
be distributed. First, it may be distributed if it is an excess 
aggregate contribution. In this case, the matching contribution will 
not be taken into account under section 401(a)(4). Thus, it will not be 
considered in determining whether there is a discriminatory rate of 
match. Second, the matching contribution may be distributed on some 
other permissible basis under the general plan qualification rules 
applicable to the type of plan under which the matching contribution 
was made, e.g., attainment of age 59\1/2\ under a profit-sharing or 
stock bonus plan. However, in that case, the amount contributed would 
still be taken into account under section 401(a)(4), and therefore the 
distribution, even if timely made, would not correct any failure to 
satisfy a nondiscrimination requirement, including a discriminatory 
rate of match. Section 1.401(m)-1(e)(4) has been amended to make this 
explicit. The 1994 Amendments also explicitly state that a matching 
contribution may not be distributed simply because it relates to an 
excess deferral, an excess contribution, or an excess aggregate 
contribution that is distributed. See Sec. 1.401(m)-1(e)(3)(vii).
    Where a matching contribution relates to an excess deferral, an 
excess contribution, or an excess aggregate contribution that is 
distributed, a discriminatory rate of match may result, unless the 
matching contribution is distributed as an excess aggregate 
contribution. If the matching contribution cannot be distributed as an 
excess aggregate contribution, so that the discriminatory rate of match 
cannot be corrected by distribution, a plan may provide that the 
matching contributions are forfeited, as permitted by sections 
411(a)(3)(G) and 401(k)(8)(E). See Secs. 1.401(k)-1(f)(5)(iii); 
1.401(m)-1(e)(4); 1.411(a)-4(b)(7). Alternatively, the discriminatory 
rate of match can be corrected by additional allocations to the 
accounts of nonhighly compensated employees, under Sec. 1.401(a)(4)-
11(g)(3)(vii)(B).

10. Multiple Use Test

    The 1991 Final Regulations, as amended by the 1994 Amendments, 
continue to provide that if any highly compensated employee is eligible 
to participate in both a section 401(k) plan and a section 401(m) plan 
of an employer, the plans must satisfy the limitation on multiple use 
of the alternative methods of compliance with the ADP and ACP tests 
(the 200%/two-percentage-point method, as opposed to the 125% method) 
that are contained in sections 401(k)(3)(A)(ii)(II) and 
401(m)(2)(A)(ii), respectively. Language has been added to 
Sec. 1.401(m)-1(a)(1) to clarify that if the plans fail to satisfy the 
multiple use limitation in operation, and the failure is not corrected 
as permitted by Sec. 1.401(m)-2(c), the section 401(m) plan fails to 
satisfy section 401 (a)(4) and (m).
    An additional clarification in the multiple use rules has been 
added to Sec. 1.401(m)-2(c)(1). The 1991 Final Regulations provide that 
multiple use may be corrected by reducing either the ADP or the ACP of 
the highly compensated employees. The 1994 Amendments clarify that 
multiple use may also be corrected by reducing a combination of the ADP 
and the ACP of the highly compensated employees.

11. Safe Harbor Hardship Withdrawal Provisions

    In response to suggestions, the 1994 Amendments expand the safe 
harbor hardship withdrawal provisions to provide that, in addition to 
tuition and related educational fees, amounts distributed for the 
payment of room and board expenses for the next 12 months of post-
secondary education will be deemed to be on account of an immediate and 
heavy financial need. See Sec. 1.401(k)-1(d)(2)(iv)(A)(3).

12. Hardship Distributions Under Profit-Sharing or Stock Bonus Plans

    The 1991 Final Regulations added Sec. 1.411(d)-4, Q&A-2(b)(2)(x) to 
make an exception to the protections of section 411(d)(6) and allow a 
qualified CODA that permits hardship distributions to be amended to 
specify or modify its standards for making such distributions, or to 
eliminate hardship distributions. In response to suggestions, the 1994 
Amendments now amend this section to allow the same flexibility to any 
profit-sharing or stock bonus plan that permits hardship distributions. 
Under this amendment, a profit-sharing or stock bonus plan has this 
flexibility whether or not the plan limits hardship distributions 
(either before or after the plan amendment) to the types of hardship 
distributions that are permitted to be made from a qualified CODA. 
Hardship distributions under a portion of the plan that is a qualified 
CODA must be restricted in accordance with section 401(k) and the 
regulations.

13. Excise Tax Transition Relief for Collectively Bargained and 
Governmental Plans

    In accordance with the applicable provisions of the Code, the 1991 
Final Regulations provide that elective contributions under a CODA that 
is part of a collectively bargained plan and that fails the ADP test 
are includible in employees' gross incomes because the CODA is not 
qualified. The 1991 Final Regulations provided transition relief by not 
making this income inclusion effective for plan years beginning before 
January 1, 1993.
    The question has arisen whether this transition relief from income 
inclusion for collectively bargained plans would be expanded to cover 
the section 4979 excise tax on excess contributions. The 1994 
Amendments respond by amending Sec. 54.4979-1(d)(3) to provide that the 
excise tax does not apply to a collectively bargained plan for plan 
years beginning before January 1, 1993. Thus, for these plan years, a 
collectively bargained plan need not perform the ADP test for any 
purpose. Furthermore, the 1994 Amendments explicitly provide that the 
excise tax does not apply to employee and matching contributions under 
a collectively bargained plan.
    For governmental plans, the nondiscrimination rules, including the 
nondiscrimination requirements under sections 401(k) and 401(m), 
generally do not apply for plan years beginning before January 1, 1996. 
The proposed amendments to the 1991 Final Regulations reflected this 
extended effective date. The 1994 Amendments adopt the proposed 
amendments and also apply the same extended effective date to the 
section 4979 excise tax.

14. One-Time Irrevocable Elections

    The 1991 Final Regulations provide that an employer may allow each 
of its employees to make a one-time irrevocable election, upon 
commencement of employment or initial eligibility under any plan of the 
employer, to have a specified amount or percentage of compensation 
(including no amount) contributed by the employer throughout the 
employee's employment. This type of election is not treated as a cash 
or deferred election. See Sec. 1.401(k)-1(a)(3)(iv).
    The question has occasionally been raised as to whether such an 
election could conceivably be made by an employee upon first becoming 
eligible under a plan even though the employee had previously become 
eligible under any other ongoing or terminated plan of the employer. 
The 1994 Amendments make clear that the answer to this question is in 
the negative. They confirm that the one-time irrevocable election 
provision was intended to preclude an election from constituting a non-
cash-or-deferred election (and thus avoiding the rules governing 
qualified CODAs) in any case where the electing employee had previously 
become eligible under another plan of the employer, including a 
terminated plan, even if the employee is making an election with 
respect to a plan under which the employee is just then becoming 
eligible. Thus, an employee can make an election under Sec. 1.401(k)-
1(a)(3)(iv) only once during employment with a particular employer 
(even if, over time, the employee becomes eligible under more than one 
plan of the employer). This election can be made either (1) upon 
commencement of employment with the employer, or (2) upon becoming 
eligible under the plan of the employer under which the employee 
becomes eligible first.
    The 1991 Final Regulations reiterated a special, additional, one-
time election transition rule for plans maintained by partnerships. See 
Sec. 1.401(k)-1(a)(6)(ii)(C). This transition relief originally had 
been provided for under Notice 88-127, 1988-2 C.B. 538. See also Rev. 
Proc. 91-47, 1991-2 C.B. 757. As an alternative to compliance by a plan 
with the qualified CODA rules, the transition rule was intended to give 
existing partnership plans a limited period of time (until the later of 
the first day of the first plan year beginning after December 31, 1988, 
or March 31, 1989) for employees and partners to make one-time 
irrevocable elections, even after their commencement of employment or 
their initial eligibility under the plan or any other plan of the 
employer. However, occasional questions have been raised since 1989 as 
to whether this could nonetheless be interpreted as a continuing 
transition rule for partnerships that might permit such one-time 
irrevocable elections to be made in the future. The 1994 Amendments 
explicitly confirm that such elections under the special partnership 
transition rule may not be made in the future. A partnership may, of 
course, continue to allow partners and employees to make one-time 
irrevocable elections under the general rule of Sec. 1.401(k)-
1(a)(3)(iv) in the same limited circumstances as any other employer.

15. Limit on Annual Additions

a. Corrective Distribution of Elective Deferrals
    The 1991 Final Regulations amended Sec. 1.415-6(b)(6) to allow 
plans to distribute elective deferrals to correct excess annual 
additions resulting from a reasonable error in determining the amount 
of elective deferrals that a participant may make under the limits of 
section 415. A question has arisen as to whether gains (investment 
gains and other income) attributable to the distributed elective 
deferrals are treated for section 415 purposes in a manner similar to 
gains attributable to employee contributions that are returned pursuant 
to Sec. 1.415-6(b)(6) (which have been explicitly addressed in that 
regulation since before 1991). The 1994 Amendments make clear that 
similar treatment is intended, by providing that if gains attributable 
to the distributed elective deferrals are not also distributed to the 
employee, the gains will be considered as employer contributions for 
the limitation year in which the distributed elective deferrals were 
made. This provision of the 1994 Amendments is effective for limitation 
years beginning after December 31, 1995.
b. Plan Amendments Reducing Accrued Benefits to Comply With Tax Reform 
Act of 1986
    The Tax Reform Act of 1986 (TRA '86) generally reduced the amount 
of benefits that could be provided by a defined benefit plan under the 
section 415 benefit limitations. The changes generally were effective 
for limitation years beginning after December 31, 1986. However, 
section 1106(i)(3) of TRA '86 protected the ``current accrued benefit'' 
of an individual who was a participant in a defined benefit plan 
meeting certain requirements. The ``current accrued benefit'' was 
defined as the benefit that accrued before the effective date, not 
including any benefits under new plans or any benefits resulting from 
changes in existing plans after May 5, 1986. These additional accruals 
generally caused plan disqualification when the new limits applied. 
Notice 87-21, 1987-1 C.B. 458, Q&A-13, illustrated this effect and 
stated that future regulations would provide section 411(d)(6) relief 
allowing defined benefit plans to reduce accrued benefits that 
otherwise would violate the applicable limit. This relief would create 
an exception to the general section 411(d)(6) prohibition against plan 
amendments reducing accrued benefits.
    Q&A-17 of Notice 87-21 illustrated that these additional accruals 
could also result in a violation of the combined limit on contributions 
and benefits under section 415(e). The combined limit applies to 
participants covered by both a defined benefit plan and a defined 
contribution plan. Such a violation could occur even if the defined 
benefit plan was terminated before the effective date of the section 
415 changes, and even if no contributions were made to the defined 
contribution plan after the effective date.
    The 1991 Final Regulations added Sec. 1.411(d)-4, Q&A-2(b)(2)(xi) 
to permit a defined benefit plan to reduce benefits that otherwise 
would violate the lower section 415(b) limit under TRA '86. These 1994 
Amendments now expand this relief by allowing a reduction in benefits 
under either a defined benefit plan or a defined contribution plan to 
satisfy the combined limit under section 415(e), which also was reduced 
as a result of the changes made by TRA '86. This amendment to 
Sec. 1.411(d)-4, Q&A-2(b)(2)(xi), will also allow a defined 
contribution plan to reduce a participant's account balance where the 
defined benefit plan has been terminated and thus can no longer be 
amended to reduce the participant's benefits. See also Sec. 1.415-
6(b)(6), providing methods for correcting excess annual additions to 
defined contribution plans in certain circumstances.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in EO 12866. Therefore, a 
regulatory assessment is not required. It also has been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to 
these regulations, and, therefore, a Regulatory Flexibility Analysis is 
not required. Pursuant to section 7805(f)(3) of the Internal Revenue 
Code, these regulations were submitted to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on their 
impact on small business.

Drafting Information

    The principal author of these regulations is Catherine Livingston 
Fernandez, Office of the Associate Chief Counsel (Employee Benefits and 
Exempt Organizations), IRS. However, personnel from other offices of 
the IRS and Treasury Department participated in their development.