journal of pension planning & compliance - Kluwer Law International

SUMMARY OF CODE SECTION 415(M) PLANS / 11
tool for addressing the tension that may arise between state or local
law provisions protecting a participant’s right to their entire statutory
benefit and the limitations imposed by Code Section 415 on the
amount of that benefit permissible from the qualified plan. A QEBA
can also be designed to be used in connection with either a defined
contribution retirement plan or a defined benefit pension plan to provide
contributions and benefits in excess of Code Section 415 limits.
GENERAL REQUIREMENTS
A QEBA must satisfy the following three requirements under
Code Section 415(m):
1. The excess benefit plan must be maintained solely to provide participants
in the excess benefit plan the part of the participant’s
annual benefit (or contribution) otherwise payable (or contributable)
under the qualified retirement plan except that the benefit (or
contribution) exceeds the applicable Code Section 415 limits;
2. Participants must have no right at any time to defer compensation
to the excess benefit plan; and
3. Benefits cannot be paid from a trust forming part of the qualified
retirement plan unless the trust is maintained solely for the purpose
of providing benefits under the excess benefit plan.
INCOME TAX TREATMENT
With regard to the income tax treatment of QEBAs, Code Section
415(m)(2) provides that:
(A) The taxable year or years for which amounts in respect
of a qualified governmental excess benefit arrangement are
includible in gross income by a participant, and
(B) The treatment of such amounts when so includible
by the participant, shall be determined as if such qualified
governmental excess benefit arrangement were treated as a
plan for the deferral of compensation which is maintained
by a corporation not exempt from tax under this chapter and
which does not meet the requirements for qualification under
Section 401.