[Code of Federal Regulations]
[Title 26, Volume 5]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.401(a)(26)-4]

[Page 258-259]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.401(a)(26)-4  Testing former employees.

    (a) Scope. This section applies to any defined benefit plan that 
benefits former employees in a plan year within the meaning of Sec. 
1.401(a)(26)-5(b) and does not meet one of the exceptions in Sec. 
1.401(a)(26)-1(b).
    (b) Minimum participation rule for former employees. Except as set 
forth in paragraph (c) of this section, a plan that is subject to this 
section must benefit at least the lesser of:
    (1) 50 former employees of the employer, or
    (2) 40 percent of the former employees of the employer.

[[Page 259]]

    (c) Special rule. A plan satisfies the minimum participation rule in 
paragraph (b) of this section if the plan benefits at least five former 
employees, and if either:
    (1) More than 95 percent of all former employees with vested accrued 
benefits under the plan benefit under the plan for the plan year, or
    (2) At least 60 percent of the former employees who benefit under 
the plan for the plan year are nonhighly compensated former employees.
    (d) Excludable former employees--(1) General rule. Whether a former 
employee is an excludable former employee for purposes of this section 
is determined under Sec. 1.401(a)(26)-6(c).
    (2) Exception. Solely for purposes of paragraph (c) of this section, 
the rule in Sec. 1.401(a)(26)-6(c)(4) (regarding vested accrued 
benefits eligible for mandatory distribution) does not apply to any 
former employee having a vested accrued benefit. Thus, a former employee 
who has a vested accrued benefit is not an excludable former employee 
merely because that vested accrued benefit does not exceed the cash-out 
limit in effect under Sec. 1.411(a)-11(c)(3)(ii).

[T.D. 8375, 56 FR 63416, Dec. 4, 1991, as amended by T.D. 8794, 63 FR 
70338, Dec. 21, 1998; T.D. 8891, 65 FR 44682, July 19, 2000]