[Code of Federal Regulations]
[Title 26, Volume 5]
[Revised as of April 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.401(a)(26)-3]

[Page 209-210]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
DEFERRED COMPENSATION, ETC.--Table of Contents
 
Sec. 1.401(a)(26)-3  Rules applicable to a defined benefit plan's prior benefit structure.

    (a) General rule. A defined benefit plan that does not meet one of 
the exceptions in Sec. 1.401(a)(26)-1(b) must satisfy paragraph (c) of 
this section with respect to its prior benefit structure. Defined 
contribution plans are not subject to this section.
    (b) Prior benefit structure. Each defined benefit plan has only one 
prior benefit structure, and all accrued benefits under the plan as of 
the beginning of a plan year (including benefits rolled over or 
transferred to the plan) are included in the prior benefit structure for 
the year.
    (c) Testing a prior benefit structure--(1) General rule. A plan's 
prior benefit structure satisfies this paragraph if the plan provides 
meaningful benefits to a group of employees that includes the lesser of 
50 employees or 40 percent of the employer's employees. Thus, a plan 
satisfies the requirements of this paragraph (c) if at least 50 
employees or 40 percent of the employer's employees currently accrue 
meaningful benefits under the plan. Alternatively, a plan satisfies this 
paragraph if at least 50 employees and former employees or 40 percent of 
the employer's employees and former employees have meaningful accrued 
benefits under the plan.
    (2) Meaningful benefits. Whether a plan is providing meaningful 
benefits,

[[Page 210]]

or whether individuals have meaningful accrued benefits under a plan, is 
determined on the basis of all the facts and circumstances. The relevant 
factors in making this determination include, but are not limited to, 
the following: the level of current benefit accruals; the comparative 
rate of accruals under the current benefit formula compared to prior 
rates of accrual under the plan; the projected accrued benefits under 
the current benefit formula compared to accrued benefits as of the close 
of the immediately preceding plan year; the length of time the current 
benefit formula has been in effect; the number of employees with accrued 
benefits under the plan; and the length of time the plan has been in 
effect. A rule for determining whether an offset plan provides 
meaningful benefits is provided in Sec. 1.401(a)(26)-5(a)(2). A plan 
does not satisfy this paragraph (c) if it exists primarily to preserve 
accrued benefits for a small group of employees and thereby functions 
more as an individual plan for the small group of employees or for the 
employer.
    (d) Multiemployer plan rule. A multiemployer plan is deemed to 
satisfy the prior benefit structure rule in paragraph (c)(1) of this 
section for a plan year if the multiemployer plan provides meaningful 
benefits to at least 50 employees for a plan year, or 50 employees have 
meaningful accrued benefits under the plan. For purposes of this 
paragraph, all employees benefiting under the multiemployer plan may be 
considered, whether or not these employees are included in a unit of 
employees covered pursuant to any collective bargaining agreement.

[T.D. 8375, 56 FR 63415, Dec. 4, 1991]