Substantive Requirements

In addition, the regulations make clear that in order to be eligible for the exception from the deduction limits of Sections 419 and 419A, a plan must satisfy the requirements of Section 419A(f)(6) and these regulations both in form and operation. The determination of whether a plan satisfies these requirements is based on the totality of the arrangement and all related facts and circumstances, including any related insurance contracts. Thus, all agreements and understandings (including promotional materials and policy illustrations) will be taken into account in determining whether the requirements of Section 419A(f)(6) are satisfied in form and in operation. For example, if promotional materials indicate that an employer or its employees can be expected to receive a future benefit based on the employer’s accumulated contributions, the plan will be treated as maintaining experience rating arrangements with respect to individual employers, even if the formal plan does not specifically provide for experience rating.

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