Reg. § 1.401(a)(26)-1 Minimum participation requirements.
(a) General rule A plan is a qualified plan for a plan year only if the plan satisfies section for the plan year. A plan that satisfies any of the exceptions described in of this section passes section automatically for the plan year. A plan that does not satisfy one of the exceptions in of this section must satisfy . In addition, a defined benefit plan must satisfy with respect to its prior benefit structure. Finally, a defined benefit plan that benefits former employees (for example, a defined benefit plan that is amended to provide an ad hoc cost-of-living adjustment to former employees) must separately satisfy with respect to its former employees.
(b) Exceptions to section 401(a)(26)
(1) Plans that do not benefit any highly compensated employees A plan, other than a frozen defined benefit plan as defined in , satisfies section for a plan year if the plan is not a top-heavy plan under section and the plan meets the following requirements:
(i) The plan benefits no highly compensated employee or highly compensated former employee of the employer; and
(ii) The plan is not aggregated with any other plan of the employer to enable the other plan to satisfy section or . The plan may, however, be aggregated with the employer's other plans for purposes of the average benefit percentage test in section .
(2) Multiemployer plans
(i) In genera1 The portion of a multiemployer plan that benefits only employees included in a unit of employees covered by a collective bargaining agreement may be treated as a separate plan that satisfies section for a plan year.
(ii) Multiemployer plans covering noncollectively bargained employees
(A) In general The rule provided in paragraph (b)(2)(i) does not apply to the portion of a multiemployer plan that benefits employees who are not included in any collective bargaining unit covered by a collective bargaining agreement. Thus, the portion of the plan benefiting these employees must separately satisfy section .
(B) Special testing rule A multiemployer plan that benefits employees who are not included in any collective bargaining unit covered by a collective bargaining agreement satisfies section if the plan benefits 50 employees. For purposes of this special testing rule, employees who are included in a unit of employees covered by a collective bargaining agreement may be included in determining whether the plan benefits 50 employees.
(3) Certain underfunded defined benefit plans
(i) In general A defined benefit plan is deemed to satisfy section for a plan year if all of the conditions of through of this section are satisfied with respect to the plan for the plan year.
(ii) Eligible plans This condition is satisfied for a plan year only if the plan is subject to title IV of the Employee Retirement Income Security Act of 1974 (ERISA) for the plan year or, if the plan is not a title IV plan under ERISA, it is not a top-heavy plan within the meaning of section . This condition does not apply for plan years beginning before January 1, 1992.
(iii) Actuarial certification This condition is satisfied for a plan year only if the employer's timely filed actuarial report, as required by section , evidences that the plan does not have sufficient assets to satisfy all liabilities under the plan (determined in accordance with section ).
(iv) Cessation of all benefit accruals This condition is satisfied for a plan year only if, for the plan year, no employee or former employee is benefiting within the meaning of or . For this purpose, an employee is not treated as benefiting solely by reason of being a non-key employee receiving minimum benefit accruals required by section .
(4) Section 401(k) plan maintained by employers that include certain governmental or tax-exempt entities Section prevents certain State and local governments and tax-exempt organizations from maintaining a qualified cash or deferred arrangement. A plan (or portion of a plan) that is either a section plan or a section plan that is provided under the same general arrangement as a section plan may be treated as a separate plan that satisfies section for a plan year if the following requirements are satisfied:
(i) The section plan is maintained by an employer who has employees precluded from being eligible employees under the arrangement by reason of section , and
(ii) More than 95 percent of the employees of the employer who are not precluded from being eligible employees under a section plan by reason of section benefit under the section plan.
(5) Certain acquisitions or dispositions
(i) General rule Rules similar to the rules prescribed under section apply under section . Pursuant to these rules, the requirements of section are treated as satisfied for certain plans of an employer involved in an acquisition or disposition (transaction) for the transition period. The transition period begins on the date of the transaction and ends on the last day of the first plan year beginning after the date of the transaction.
(ii) Special rule for transactions that occur in the plan year prior to the first plan year to which section 401(a)(26) applies Where there has been a transaction described in section in the plan year prior to the first plan year in which section applies to a plan, the plan satisfies section for the transition period if the plan benefited 50 employees or 40 percent of the employees of the employer immediately prior to the transaction.
(iii) Definition of “acquisition” and “disposition.” For purposes of this , the terms “acquisition” and “disposition” refer to an asset or stock acquisition, merger, or other similar transaction involving a change in employer of the employees of a trade or business.
(c) Additional rules The Commissioner may, in revenue rulings, notices, and other guidance of general applicability, provide any additional rules that may be necessary or appropriate in applying the minimum participation requirements of section .
[T.D. 8375, 56 FR 63413, Dec. 4, 1991, as amended by T.D. 8487, 58 FR 46838, Sept. 3, 1993]