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1986), on the ground that it contradicts the plain language of
section 419.
A. Claims Incurred But Unpaid
Section 419A(c)(5)(A) provides that, without an actuarial
certification with respect to an account limit determined under
section 419A(c), the account limit may not exceed certain "safe
harbor" limits for the taxable year. In the case of short-term
disability benefits, the safe harbor limit for any taxable year
is 17.5 percent of the QDC (other than insurance premiums) for
the immediately preceding taxable year with respect to such
benefits. Sec. 419A(c)(5)(B)(i). In the case of medical
benefits, the safe harbor limit for any taxable year is 35
percent of the QDC (other than insurance premiums) incurred for
such benefits in the prior taxable year. Sec. 419A(c)(5)(B)(ii).
The safe harbor limits are not automatic safe harbors because a
taxpayer will not be entitled to use such limits unless they are
reasonable, as required by section 419A(c)(1). General Signal
Corp. & Subs. v. Commissioner, 103 T.C. 216, 232 (1994). If a
taxpayer obtains an actuarial certification, however, it is not
limited to the safe harbors.
Petitioner contends that there is no reasonableness
requirement in section 419A(c)(5), and therefore it is entitled
to use the safe harbor limits. Based on those limits, the
additions to the account limit attributable to medical, dental
and short-term disability CIBU's are $10,020,825 (plus $617,245
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