qualified replacement plan

(2) Qualified replacement plan For purposes of this subsection, the term “qualified replacement plan” means a qualified plan established or maintained by the employer in connection with a qualified plan termination (hereinafter referred to as the “replacement plan”) with respect to which the following requirements are met: (A) Participation requirement At least 95 percent of the active participants in the terminated plan who remain as employees of the employer after the termination are active participants in the replacement plan. (B) Asset transfer requirement (i) 25 percent cushion A direct transfer from the terminated plan to the replacement plan is made before any employer reversion, and the transfer is in an amount equal to the excess (if any) of— (I) 25 percent of the maximum amount which the employer could receive as an employer reversion without regard to this subsection, over (II) the amount determined under clause (ii). (ii) Reduction for increase in benefits The amount determined under this clause is an amount equal to the present value of the aggregate increases in the accrued benefits under the terminated plan of any participants or beneficiaries pursuant to a plan amendment which— (I) is adopted during the 60-day period ending on the date of termination of the qualified plan, and (II) takes effect immediately on the termination date. (iii) Treatment of amount transferred In the case of the transfer of any amount under clause (i)— (I) such amount shall not be includible in the gross income of the employer, (II) no deduction shall be allowable with respect to such transfer, and (III) such transfer shall not be treated as an employer reversion for purposes of this section. (C) Allocation requirements (i) In general In the case of any defined contribution plan, the portion of the amount transferred to the replacement plan under subparagraph (B)(i) is— (I) allocated under the plan to the accounts of participants in the plan year in which the transfer occurs, or (II) credited to a suspense account and allocated from such account to accounts of participants no less rapidly than ratably over the 7-plan-year period beginning with the year of the transfer. (ii) Coordination with section 415 limitation If, by reason of any limitation under section 415, any amount credited to a suspense account under clause (i)(II) may not be allocated to a participant before the close of the 7-year period under such clause— (I) such amount shall be allocated to the accounts of other participants, and (II) if any portion of such amount may not be allocated to other participants by reason of any such limitation, shall be allocated to the participant as provided in section 415. (iii) Treatment of income Any income on any amount credited to a suspense account under clause (i)(II) shall be allocated to accounts of participants no less rapidly than ratably over the remainder of the period determined under such clause (after application of clause (ii)). (iv) Unallocated amounts at termination If any amount credited to a suspense account under clause (i)(II) is not allocated as of the termination date of the replacement plan— (I) such amount shall be allocated to the accounts of participants as of such date, except that any amount which may not be allocated by reason of any limitation under section 415 shall be allocated to the accounts of other participants, and (II) if any portion of such amount may not be allocated to other participants under subclause (I) by reason of such limitation, such portion shall be treated as an employer reversion to which this section applies.

Source

26 USC § 4980(d)(2)


Scoping language

For purposes of this subsection
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