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In Rev. Rul. 94-75, 1994-50 I.R.B. 8, the IRS provided guidance on the qualification requirements and deduction limits applicable when a defined benefit plan is converted to an insurance contract plan under Code Sec412(i). The ruling imposes some new requirements on such conversions and will have an impact in situations where employers are considering such a conversion in order to recapture excess funding in the defined benefit plan.
Defined benefit plans are subject to minimum funding requirements of Sec412. Insurance contract plans described in Sec412(i), on the other hand, are exempt from the minimum funding requirements. Under Sec412(i), insurance contract plans must satisfy a number of requirements, one of which is particularly important for purposes of Rev. Rul. 94-75. Section Sec412(i)(2) requires that a Sec412(i) plan provide for level annual premium payments to be paid starting with the date an individual becomes a participant in a...