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In relevant part, section 401(a) provides:
SEC. 401(a). Requirements for Qualification.--A
trust created or organized in the United States and
forming part of a stock bonus, pension, or profit-
sharing plan of an employer for the exclusive benefit
of his employees or their beneficiaries shall
constitute a qualified trust under this section--
* * * * * * *
(3) if the plan of which such trust is a
part satisfies the requirements of section
410 (relating to minimum participation
standards); * * *
Section 410(b)(1)(A), as applicable for plan years beginning
before January 1, 1989,4 generally provided that a trust was not
a qualified trust under section 401(a) unless the trust benefited
either 70 percent or more of all employees or 80 percent or more
of the employees who were eligible to benefit under the plan if
70 percent or more of all the employees were eligible to benefit
under the plan.5 Section 414(b) and (m) provides:
4 The coverage requirement under sec. 410(b) was amended by
the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1112(a)
and (e), 100 Stat. 2440, 2445, effective for plan years beginning
after Dec. 31, 1988.
5 Sec. 410(b)(1)(B), as in effect before the enactment of
the TRA amendments in 1986, provided that a plan can
alternatively meet the coverage requirements by benefiting such
employees as qualify under a classification set up by the
employer and found by the Secretary not to be discriminatory in
favor of employees who are officers, shareholders, or highly
compensated. Such provision is not relevant here inasmuch as
there is no evidence that petitioner set up a separate
classification of employees to be covered by the MGMT ESOP or
that the Secretary approved any such designation as
nondiscriminatory.
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Last modified: May 25, 2011