[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: 26CFR1.414(l)-1]
[Page 694-702]
TITLE 26--INTERNAL REVENUE
CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY
(CONTINUED)
PART 1_INCOME TAXES--Table of Contents
Sec. 1.414(l)-1 Mergers and consolidations of plans or transfers of
plan assets.
(a) In general--(1) Scope of the regulations. Sections 401(a)(12)
and 414(l) apply only to plans to which section 411 applies without
regard to section 411(e)(2). Thus, for example, these sections do not
apply to a governmental plan within the meaning of section 414(d); a
church plan, within the meaning of section 414(e), for which there has
not been made the election under section 410(d) to have the
participation, vesting, funding, etc. requirements apply; or a plan
which at no time after September 2, 1974, provided for employer
contributions.
(2) General rule. Under section 414(l),
(i) A trust which forms a part of a plan will not constitute a
qualified trust under section 401, and
(ii) A plan will not be treated as being qualified under section 403
(a) and 405 (a), unless, in the case of a merger or consolidation (as
defined in paragraph (b)(2) of this section), or a transfer of assets or
liabilities (as defined in paragraph (b)(3) of this section), the
following condition is satisfied. This condition requires that each
participant receive benefits on a termination basis (as defined in
paragraph (b)(5) of this section) from the plan immediately after the
merger, consolidation or transfer which are equal to or greater than the
benefits the participant would receive on a termination basis
immediately before the merger, consolidation, or transfer.
(b) Definitions. For purposes of this section:
(1) Single plan. A plan is a ``single plan'' if and only if, on an
ongoing basis, all of the plan assets are available to pay benefits to
employees who are covered by the plan and their beneficiaries. For
purposes of the preceding sentence, all the assets of a plan will not
fail to be available to provide all the benefits of a plan merely
because the plan is funded in part or in whole with allocated insurance
instruments. A plan will not fail to be a single plan merely because of
the following:
(i) The plan has several distinct benefit structures which apply
either to the same or different participants,
(ii) The plan has several plan documents,
(iii) Several employers, whether or not affiliated, contribute to
the plan,
(iv) The assets of the plan are invested in several trusts or
annuity contracts, or
(v) Separate accounting is maintained for purposes of cost
allocation but not for purposes of providing benefits under the plan.
However, more than one plan will exist if a portion of the plan assets
is not available to pay some of the benefits. This will be so even if
each plan has the same benefit structure or plan document, or if all or
part of the assets are invested in one trust with separate accounting
with respect to each plan.
(2) Merger or consolidation. The terms ``merger'' or
``consolidation'' means the combining of two or more plans into a single
plan. A merger or consolidation will not occur merely because one or
more corporations undergo a reorganization (whether or not taxable).
Furthermore, a merger or consolidation will not occur if two plans are
not combined into a single plan, such as by using one trust which limits
the availability of assets of one plan to provide benefits to
participants and beneficiaries of only that plan.
(3) Transfer of assets or liabilities. A ``transfer of assets or
liabilities'' occurs when there is a diminution of assets or liabilities
with respect to one plan and the acquisition of these assets or the
assumption of these liabilities by another plan. For example, the
shifting of assets or liabilities pursuant to a reciprocity agreement
between two plans in which one plan assumes liabilities of another plan
is a transfer of assets or liabilities. However, the shifting of assets
between several funding media used for a single plan (such as between
trusts, between annuity contracts, or
[[Page 695]]
between trusts and annuity contracts) is not a transfer of assets or
liabilities.
(4) Spinoff. The term ``spinoff'' means the splitting of a single
plan into two or more plans.
(5) Benefits on a termination basis. (i) The term ``benefits on a
termination basis'' means the benefits that would be provided
exclusively by the plan assets pursuant to section 4044 of the Employee
Retirement Income Security Act of 1974 (``ERISA'') and the regulations
thereunder if the plan terminated. Thus, the term does not include
benefits that are guaranteed by the Pension Benefit Guaranty
Corporation, but not provided by the plan assets.
(ii) For purposes of determining the benefits on a termination
basis, the allocation of assets to various priority categories under
section 4044 of ERISA must be made on the basis of reasonable actuarial
assumptions. The assumptions used by the Pension Benefit Guaranty
Corporation as of the date of the merger or spinoff are deemed
reasonable for this purpose.
(iii) If a change in the benefit structure of a plan in conjunction
with a merger, consolidation, or transfer of assets or liabilities
alters the benefits on a termination basis, the change should be
designated, at the time the merger, consolidation, or transfer occurs,
to be effective either immediately before or immediately after that
occurrence. In the event that no designation is made, the change in the
benefit structure will be deemed to occur immediately after the merger,
consolidation, or transfer of assets or liabilities.
(6) Lower funded plan. (i) The term ``lower funded plan'' generally
means the plan which, immediately prior to the merger, would have its
assets exhausted in a higher priority category than the other plan.
(ii) Where two plans, immediately prior to the merger, would have
their assets exhausted in the same priority category of section 4044 of
ERISA in the event of termination, the lower funded plan is the one in
which the assets would satisfy a lesser proportion of the liability
allocated to that priority category.
(7) Priority category. The term ``priority category'' means the
category of benefits described in each paragraph of section 4044(a) of
ERISA. References to higher or highest priority categories refer to
those priority categories which receive the first allocation of asserts,
i.e. the lowest paragraph numbers in section 4044(a).
(8) Separate accounting of assets. The term ``separate accounting of
assets'' means the maintenance of an asset account with respect to a
given group of participants which is:
(i) Credited with contributions made to the plan on behalf of the
participants and with its allocable share of investment income, if any,
and
(ii) Charged with benefits paid to the participants, and with its
allocable share of investment losses or expenses.
(9) Present value of accrued benefit. For purposes of this section,
the present value of an accrued benefit must be determined on the basis
of reasonable actuarial assumptions. For this purpose, the assumptions
used by the Pension Benefit Guaranty Corporation as of the date of the
merger or spinoff are deemed reasonable.
(10) Valuation of plan assets. In determining the value of a plan's
assets, the standards set forth in regulations prescribed by the Pension
Benefit Guaranty Corporation (29 CFR Part 2611) shall be applied.
(11) Date of merger or spinoff. The actual date of a merger or
spinoff shall be determined on the basis of the facts and circumstances
of the particular situation. For purposes of this determination, the
following factors, none of which is necessarily controlling, are
relevant:
(i) The date on which the affected employees stop accruing benefits
under one plan and begin coverage and benefit accruals under another
plan.
(ii) The date as of which the amount of assets to be eventually
transferred is calculated.
(iii) If the merger or spinoff agreement provides that interest is
to accrue from a certain date to the date of actual transfer, the date
from which such interest will accrue.
(c) Application of section 414(l)--(1) Two or more plans. (i)
Section 414(l) does not apply unless more than a single plan is
involved. It also does not apply unless at least a single plan assumes
liabilities from another plan or obtains
[[Page 696]]
assets from another plan (as in a merger or spinoff). For purposes of
section 414(l), a transfer of assets or liabilities will not be deemed
to occur merely because a defined contribution plan is amended to become
a defined benefit plan. This rule will apply even if, under the facts
and circumstances of a particular case, a termination of the defined
contribution plan will be considered to have occurred for purposes of
other provisions of the Code.
(ii) The requirements of this subparagraph may be illustrated as
follows:
Example. After acquiring Corporation B, Corporation A amends
Corporation B's defined benefit plan (Plan B) to provide the same
benefits as Corporation A's defined benefit plan (Plan A). The assets of
Plan B are transferred to the trust containing the assets of Plan A in
such a manner that the assets of each plan: (1) are separately accounted
for, and (2) are not available to pay benefits of the other plan.
Because of condition (2) there are still two plans and, therefore, a
merger did not occur. As a result, section 414(l) does not apply. If at
some later date Corporation A were to sell Corporation B and transfer
the assets of Plan B that were separately accounted for to another trust
or to an annuity contract solely for the purpose of providing Plan B's
benefits, this transfer would also not involve section 414(l). This is
so because Plan B was a separate plan before the entire transaction and
because no plan assumed liabilities or obtained assets from another
plan. If, on the other hand, Corporation A merged Plan A and Plan B at
the time of the acquisition of Corporation B by deleting condition (2)
above, then section 414(l) would apply both to the merger of Plan A and
Plan B and to the spinoff of Plan B from the merged plan. The spinoff
would have to satisfy the requirements of paragraph (n) of this section,
even if the assets attributable to Plan A and Plan B were separately
accounted for in order to allocate funding costs.
(2) Multiemployer plans. Except to the extent provided by
regulations of the Pension Benefit Guaranty Corporation, section 114(l)
does not apply to any transaction to the extent that participants either
before or after that transaction are covered under a multiemployer plan
within the meaning of section 414(f). Until these regulations are
issued, section 414(l) does not apply to any of the following
situations:
(i) A multiemployer plan is split into two or more plans, one or
more of which are not multiemployer plans, or (ii) A single employer
plan is merged into a multiemployer plan.
Therefore, if some (but not all) of the participants in a single
employer plan become participants in a multiemployer plan under an
agreement in which the multiemployer plan assumes all the liabilities of
the single employer plan with respect to these participants and in which
some or all of the assets of the single employer plan are transferred to
the multiemployer plan, section 414(l) applies, but only with respect to
the participants in the single employer plan who did not transfer to the
multiemployer plan.
(d) Merger of defined contribution plans. In the case of a merger of
two or more defined contribution plans, the requirements of section
414(l) will be satisfied if all of the following conditions are met:
(1) The sum of the account balances in each plan equals the fair
market value (determined as of the date of the merger) of the entire
plan assets.
(2) The assets of each plan are combined to form the assets of the
plan as merged.
(3) Immediately after the merger, each participant in the plan as
merged has an account balance equal to the sum of the account balances
the participant had in the plans immediately prior to merger.
(e) Merger of defined benefit plans--(1) General rule. Section
414(l) compares the benefits on a termination basis before and after the
merger. If the sum of the assets of all plans is not less than the sum
of the present values of the accrued benefit (whether or not vested) of
all plans, the requirements of section 414(l) will be satisfied merely
by combining the assets and preserving each participant's accrued
benefits. This is so because all the accrued benefits of the plan as
merged are provided on a termination basis by the plan as merged.
However, if the sum of the assets of all plans is less than the sum of
the present values of the accrued benefits (whether or not vested) in
all plans, the accrued benefits in the plan as merged are not provided
on a termination basis.
(2) Special schedule of benefits. Generally, for some participants,
the benefits provided on a termination basis for
[[Page 697]]
the plan as merged would be different from the benefits provided on a
termination basis in the plans prior to merger if the assets were merely
combined and if each participant retained his accrued benefit. Some
participants would, therefore, receive greater benefits on a termination
basis as a result of the merger and some other participants would
receive smaller benefits. Accordingly, the requirements of section
414(l) would not be satisfied unless the distribution on termination
were modified in some manner to prevent any participant from receiving
smaller benefits on a termination basis as a result of the merger. This
is accomplished through modifying the application of section 4044 of
ERISA by inserting a special schedule of benefits.
(f) Operational rules for the special schedule. The application of
section 4044 of ERISA as modified by the schedule of benefits is
accomplished by the following steps:
(1) Section 4044 is applied in the plan as merged through the
priority categories fully satisfied by the assets of the lower funded
plan immediately prior to the merger.
(2) The assets in the plan as merged are then allocated to the next
priority category as a percentage of the value of the benefits that
would otherwise be allocated to that priority category. That percentage
is the ratio of (i) the assets allocated to the first priority category
not fully satisfied by the lower funded plan immediately prior to the
merger to (ii) the assets that would have been allocated had that
priority category been fully satisfied.
(3) A schedule of benefits is formed listing participants and
scheduled accrued benefits. The scheduled accrued benefit is the excess
of the benefits provided on a termination basis with respect to any
participant from the plans immediately prior to the merger, over the
benefits provided on a termination basis in subparagraphs (1) and (2) of
this paragraph immediately after the merger. After allocating the assets
in accordance with subparagraph (2) of this paragraph, the assets are
allocated to the schedule of benefits as follows:
(i) First the assets are allocated to the scheduled benefits to the
extent that the participant would have benefits provided in subparagraph
(4) of this paragraph if there were no scheduled benefits.
(ii) Then the assets are allocated to the scheduled benefits to the
extent that the participant would have benefits provided pursuant to
subparagraph (5) of this paragraph if there were no scheduled benefits.
These assets should be allocated first to those scheduled benefits that
are in the highest priority category under section 4044.
(4) The assets are then allocated to those benefits in the priority
category described in subparagraph (2) of this paragraph with respect to
which assets were not allocated. This allocation is made to the extent
that these benefits are not associated with benefits in the schedule.
(5) Finally, the assets are allocated in accordance with section
4044 with respect to priority categories lower than the priority
category described in subparagraph (4) of this paragraph. This
allocation is made to the extent that these benefits are not associated
with benefits in the schedule.
(g) Successive mergers--(1) In general. In the case of a current
merger of a defined benefit plan with another defined benefit plan which
as a result of a previous merger has a special schedule, the rules of
paragraphs (e) and (f) of this section apply as if the schedule were
considered a category described in section 4044 of ERISA. Thus, a second
schedule may be formed as a result of the current merger. The second
schedule will be inserted in the priority category of section 4044
described in paragraph (f)(2) of this section as of the date of the
current merger. This priority category may be higher, lower, or within
the schedule of benefits existing on account of a previous merger. If
this priority schedule is inserted within a schedule of benefits, a new
single schedule of benefits replacing the old schedule of benefits would
in effect be created.
(2) Allocation of assets. Assets in the new schedule of benefits are
allocated as follows:
(i) First to the benefits remaining in the old schedule to the
extent that there are assets immediately prior to
[[Page 698]]
the second merger to satisfy the original benefits,
(ii) Then to the benefits provided on a termination basis from the
plans immediately prior to the second merger to the extent that they are
not provided before the schedule after the second merger or in
subdivision (i) of this subparagraph,
(iii) Then to benefits remaining in the original schedule not
included in subdivision (i) of this subparagraph.
(h) De minimis rule for merger of defined benefit plan--(1) In
general. In the case of a merger of a defined benefit plan (``smaller
plan'') whose liabilities (i.e., the present value of accrued benefits,
whether or not vested) are less than 3 percent of the assets of another
defined benefit plan (``larger plan'') as of at least one day in the
larger plan's plan year in which the merger of the two plans occurs,
section 414(l) will be deemed to be satisfied if the following condition
is met. The condition requires that a special schedule of benefits
(consisting of all the benefits that would be provided by the smaller
plan on a termination basis just prior to the merger) be payable in a
priority category higher than the highest priority category in section
4044 of ERISA. Assets will be allocated to that schedule in accordance
with the allocation of assets to scheduled benefits in paragraph (f)(3)
of this section.
(2) Application to a series of mergers. In the case of a series of
such mergers in a given plan year of the larger plan, the rule described
in subparagraph (1) of this paragraph will apply only if the sum of the
liabilities (whether or not vested) assumed by the larger plan are less
than 3 percent of the assets of the larger plan as of at least one day
in the plan year of the larger plan in which the mergers occurred.
(3) Application to a merger occurring over more than one plan year.
In the case of a merger of a smaller plan or a portion thereof with a
larger plan designed to occur in steps over more than one plan year of
the larger plan, the entire transaction will be deemed to occur in the
plan year of the larger plan which contains the first of these steps.
(4) Liabilities of the smaller plan. For purposes of subparagraphs
(2) and (3) of this paragraph, mergers satisfying paragraphs (e), (f) or
(g) of this section will be ignored in determining the sum of the
liabilities assumed by the larger plan.
(i) Data maintenance--(1) Alternative to the special schedule. In
the case of a merger which would require the creation of a special
schedule in order to satisfy section 414(l), the schedule need not be
created at the time of the merger if data sufficient to create the
schedule is maintained. The schedule would only have to be created in
the event of a subsequent plan termination or a subsequent spinoff. In
that case the schedule must be determined as of the date of the merger.
(2) Required data. The data that must be maintained depends on the
plan, and care should be taken to ensure that all necessary data is
maintained. Furthermore, in order to take advantage of the data
maintenance alternative provided in this paragraph, an enrolled actuary
must certify to the plan administrator that each element of data
necessary to determine the schedule as of the date of the merger is
maintained. This certification must be based either upon the enrolled
actuary's independent examination of the data, or upon his reliance,
which under the circumstances of the particular situation must be
reasonable, upon a written statement of the plan administrator
concerning what data is actually being maintained.
(j) Five year rule--(1) Limitation on the required use of the
special schedule. A plan will not fail to satisfy the requirements of
section 414(l) merely because the effects of the special schedule
created pursuant to paragraphs (e)(2) or (h) of this section are ignored
5 years after the date of a merger. Furthermore, the date maintained
pursuant to paragraph (i) of this section need not be maintained for
more than 5 years after the merger, if the plan does not have a spinoff
or a termination within 5 years.
(2) Illustration. If Plans A and B merge to form Plan AB and if Plan
AB merges with Plan C 3 years later to form Plan ABC and if Plan ABC
terminates 4 years later, the data relating to the merger of Plans A and
B need not be maintained for more than 5 years after the merger of Plans
A and B. In
[[Page 699]]
addition, after 5 years have elapsed after the merger of Plans A and B,
the effect of any special schedule created by the merger of Plans A and
B on the schedule created by the merger of Plans AB and C may be ignored
in determining the later schedule.
(k) Examples. The provisions of paragraphs (e) through (j) of this
section may be illustrated by the following examples:
Example (1). Plan A, whose assets are $220,000, is to be merged with
Plan B, whose assets are $200,000. Plan A has three employees. Plan B
has two employees. If Plans A and B were to terminate just prior to the
merger, the benefits provided on a termination basis would be as
follows:
[[Page 700]]
Plan A
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1)--Annual accrued benefits (2)--Present value of accrued (3)--Fair (4)--Benefits on a termination basis
--------------------------------- benefits market value --------------------------------------
--------------------------------------- of assets
Priority category of section 4044 of ERISA allocated to
EE1 EE2 EE3 EE1 EE2 EE3 priority EE1 EE2 EE3
category
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3................................................................ $10,000 ......... ......... $120,000 ........... ........... $120,000 $10,000 ........... ...........
4................................................................ 2,000 $4,000 ......... 24,000 $44,000 ........... 68,000 2,000 $4,000 ...........
5................................................................ ......... 3,000 $4,000 ........... 33,000 $40,000 32,000 ........... \1\ 1,315 \2\ $1,753
6................................................................ ......... ......... 1,000 ........... ........... 10,000 .............. ........... ........... ...........
-----------------------------------------------------------------------------------------
Total......................................................... ......... ......... ......... ........... ........... ........... 220,000 12,000 5,315 1,753
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ $3,000x$32,000/$73,000 i.e. accrued benefit x assets available for priority category 5--Total present value of accrued benefits in category 5.
\2\ $4,000x$32,000/$73,000.
Plan B
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1)--Annual accrued benefits (2)--Present value of accrued benefits (3)--Fair (4)--Benefits on a termination
----------------------------------------------------------------------------------- market basis
value of ------------------------------------
Priority category of section 4044 of ERISA assets
EE1 EE2 EE3 EE4 EE5 EE1 EE2 EE3 EE4 EE5 allocated
to priority EE1 EE2 EE3 EE4 EE5
category
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3.......................................................... ... ... ... $15,000 ......... ... ... ... $195,000 .............. $195,000 ... ... ... $15,000 .......
4.......................................................... ... ... ... ........... $5,000 ... ... ... ........... $50,000 5,000 ... ... ... ........... \1\
$500
5.......................................................... ... ... ... ........... 8,000 ... ... ... ........... 80,000 ........... ... ... ... ........... .......
------------------------------------------------------------------------------------------------------------------------------------
Total...................................................... ... ... ... ........... ......... ... ... ... ........... .............. 200,000 ... ... ... 15,000 500
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ $5,000/$5,000x$50,000.
[[Page 701]]
Because Plan B's assets are exhausted in a higher priority category
than Plan A's assets, Plan B is the lower funded plan. A schedule will,
therefore, be inserted in Priority Category 4 of the plan as merged
after providing 10% of the benefits provided in category 4, i.e. the
ratio of $5,000 assets in Plan B allocated to category 4 to the $50,000
liability in category 4. The schedule would be constructed as follows:
----------------------------------------------------------------------------------------------------------------
(2)--Benefits
(1)--Benefits provided from (3)--10% of (4)--Benefits
on a priority benefits provided (5)--Schedule
EE termination categories provided in before of benefits
basis before higher than priority schedule (2) + (1) - (4)
merger Category 4 Category 4 (3)
----------------------------------------------------------------------------------------------------------------
1............................... $12,000 $10,000 $200 $10,200 $1,800
2............................... 5,315 .............. 400 400 4,915
3............................... 1,753 .............. .............. .............. 1,753
4............................... 15,000 15,000 .............. 15,000 ..............
5............................... 500 .............. 500 500 ..............
----------------------------------------------------------------------------------------------------------------
Example (2). The facts are the same as in Example (1). The plan,
however, terminates one year later. Furthermore, no employee has accrued
additional benefits during the year except that the $2,000 benefit for
EE1, that was originally in category 4 is now in category 3.
The assets would be allocated to the priority categories to the extent
that there are assets to cover the following benefits.
----------------------------------------------------------------------------------------------------------------
Priority termination category EE1 EE2 EE3 EE4 EE5
----------------------------------------------------------------------------------------------------------------
3............................................................. $12,000 ........ ........ $15,000 ........
10% of 4...................................................... ........ $400 ........ ........ $500
Schedule of benefits included in balance of Category 4........ ........ 3,600 ........ ........ ........
Schedule of benefits included in Category 5................... ........ 1,315 $1,753 ........ ........
Schedule of benefits included in Category 6................... ........ ........ ........ ........ ........
Balance of Category 4 not included in schedule................ ........ ........ ........ ........ 4,500
Balance of Category 5 not included in schedule................ ........ 1,685 2,247 ........ 8,000
Balance of Category 6 not included in schedule................ ........ ........ 1,000 ........ ........
----------------------------------------------------------------------------------------------------------------
(l) Merger of defined benefit and defined contribution plan. In the
case of a merger of a defined benefit plan with a defined contribution
plan, one of the plans before the merger should be converted into the
other type of plan (i.e., the defined benefit converted into a defined
contribution or the defined contribution converted into a defined
benefit) and either paragraph (d) or paragraphs (e) through (j) of this
section, whichever is appropriate, should be applied.
(m) Spinoff of a defined contribution plan. In the case of a spinoff
of a defined contribution plan, the requirements of section 414(l) will
be satisfied if after the spinoff--
(1) The sum of the account balances for each of the participants in
the resulting plans equals the account balance of the participant in the
plan before the spinoff, and
(2) The assets in each of the plans immediately after the spinoff
equals the sum of the account balances for all participants in that
plan.
(n) Spinoff of a defined benefit plan--(1) General rule. In the case
of a spinoff of a defined benefit plan, the requirements of section
414(l) will be satisfied if--
(i) All of the accrued benefits of each participant are allocated to
only one of the spun off plans, and
(ii) The value of the assets allocated to each of the spun off plans
is not less than the sum of the present value of the benefits on a
termination basis in the plan before the spin off for all participants
in that spun off plan.
(2) De minimis rule. In the case of a spin off the requirements of
section 414(l) will be deemed to be satisfied if the value of the assets
spun off--
(i) Equals the present value of the accrued benefits spun off
(whether or not vested), and
(ii) In conjunction with other assets spun off during the plan year
in which the spinoff occurs in accordance with this subparagraph, is
less than 3 percent of the assets as of at least one day in that year.
[[Page 702]]
Spinoffs occurring in previous or subsequent plan years are ignored if
they are not part of a single spinoff designed to occur in steps over
more than one plan year.
(3) Special temporary rule. In the case of a defined benefit plan
maintained for different groups of employees, which is a single plan (as
defined in paragraph (b)(l) of this section) and under which there has
been separate accounting of assets for each group, a spinoff of the plan
on or before July 1, 1978, into a separate plan for each group will be
deemed to satisfy section 414 (l) if--
(i) All the liabilities with respect to each group of employees are
allocated to a separate plan for that group of employees, and
(ii) The assets that are separately accounted for with respect to
each group of employees are allocated to the separate plan for that
group of employees.
For purposes of this subparagraph, a separate accounting of assets will
not be considered to have occurred to the extent that the assets
allocated to each single plan are determined by an historical re-
creation of benefits, contributions, investment gains, etc.
(o) Transfers of assets or liabilities. Any transfer of assets or
liabilities will for purposes of section 414 (l) be considered as a
combination of separate mergers and spinoffs using the rules of
paragraphs (d), (e) through (j), (l), (m), or (n) of this section,
whichever is appropriate. Thus, for example, if in accordance with the
transfer of one or more employees, a block of assets and liabilities are
transferred from Plan A to Plan B, each of which is a defined benefit
plan, the transaction will be considered as a spinoff from Plan A and a
merger of one of the spinoff plans with Plan B. The spinoff and merger
described in the previous sentence would be subject to the requirements
of paragraphs (n) and (e) through (j) of this section respectively.
[T.D. 7638, 44 FR 48195, Aug. 17, 1979]