Beals Bros. Management Corp. - Page 5

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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                         

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