- 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