- 9 -
A defined benefit plan may contain a variable component
based on investment performance. In this respect, a defined
benefit plan can, in part, resemble a defined contribution plan.
In such instances, section 414(k) creates a "hybrid" plan and
provides that the portion of the plan that resembles a defined
contribution plan will be treated as a defined contribution plan
for certain purposes. As relevant herein, section 414(k)
provides:
(k) Certain Plans. -- A defined benefit plan which
provides a benefit derived from employer contributions which
is based partly on the balance of the separate account of a
participant shall --
(1) for purposes of section 410 * * * be treated as a
defined contribution plan,
(2) for purposes of sections 72(d) * * * 411(a)(7)(A)
* * * 415 * * * and 401(m) * * * be treated as consisting of
a defined contribution plan to the extent benefits are based
on the separate account of a participant and as a defined
benefit plan with respect to the remaining portion of
benefits under the plan, and
(3) for purposes of section 4975 * * * be treated as a
defined benefit plan. [Emphasis added.]
In order to satisfy the reference to "separate account" in
section 414(k), the separate account must be more than a mere
bookkeeping account; it must maintain the characteristics of a
defined contribution plan, including the allocation of gains and
losses to a participant's account. Malbon v. United States, 43
F.3d 466 (9th Cir. 1994); Montgomery v. United States, 18 F.3d
500 (7th Cir. 1994); see Green v. Commissioner, T.C. Memo. 1994-
340; but see Guilzon v. Commissioner, 985 F.2d 819 (5th Cir.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011