[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: 26CFR1.415-10]

[Page 820-821]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.415-10  Special aggregation rules.

    (a) General rules relating to aggregation of plans during limitation 
year--(1) Scope of aggregation rules. This section provides rules for 
those situations in which two or more existing plans, which previously 
were unaggregated, are aggregated during a particular limitation year on 
or after the effective date of section 415 and these regulations, and as 
a result, the limitations of section 415 (b), (c) or (e) are exceeded 
for that limitation year. The rules described in this section are also 
applicable with respect to the aggregation of benefits under a 
multiemployer plan described in section 414(f) that previously were not 
required to be aggregated.
    (2) Controlling date of aggregation. For purposes of this section, 
plans which are not aggregated as of the first day of a limitation year 
will not be considered aggregated for that limitation year. 
Notwithstanding the preceding sentence, if a section 403(b) annuity 
contract is aggregated with a qualified plan because of the election by 
the individual on whose behalf the annuity contract is purchased to have 
the provisions of section 415(c)(4)(C) apply for the taxable year, the 
annuity contract and the plan are deemed to be aggregated as of the 
first day of the limitation year ending with or within such taxable 
year.
    (3) Aggregation of additions and benefits. If plans are aggregated 
under this section, the following rules shall apply:
    (i) All annual additions credited to a participant's account under a 
defined contribution plan prior to the aggregation of such plan shall be 
taken into account in computing the participant's defined contribution 
plan fraction for purposes of applying the limitations of section 415(e) 
to the aggregated plans.
    (ii) The annual benefit or projected annual benefit (whichever is 
applicable) of a participant under a defined benefit plan prior to the 
aggregation of such plan shall be taken into account for purposes of 
applying the limitations of section 415(b) or section 415(e) to the 
aggregated plans.
    (iii) For a special rule relating to the aggregation of 
contributions to a section 403(b) annuity contract upon the aggregation 
of the annuity contract with a qualified plan, see Sec. 1.415-
7(h)(4)(i).
    (b) Aggregation of defined benefit plans. In the case of an 
individual who is a participant in two or more defined benefit plans and 
with respect to whom the limitations of section 415(b) and Sec. 1.415-3 
are exceeded for a particular limitation year because of the aggregation 
of the plans for that limitation year, the limitations of section 415(b) 
and Sec. 1.415-3 may be exceeded for that limitation year and for 
future limitation years provided that there is no increase in the 
participant's accrued benefit derived from employer contributions during 
the period within which these limitations are being exceeded.
    (c) Aggregation of defined benefit and defined contribution plan. In 
the case of an individual who has at any time participated in a defined 
benefit plan and also has at any time participated in a defined 
contribution plan and with respect to whom the limitations of section 
415(e) and Sec. 1.415-7 are exceeded for a particular limitation year 
because of the aggregation of the plans for that limitation year, the 
limitations of section 415(e) and Sec. 1.415-7 may be exceeded for that 
limitation year and for future limitation years provided that the 
following conditions are complied with during that period:
    (1) The participant's accrued benefit derived from employer 
contributions in the defined benefit plan is not increased.
    (2) No employer contributions are allocated to the participant's 
account under any defined contribution plan.
    (3) No forfeitures arising under any defined contribution plan are 
allocated to the participant's account.

[[Page 821]]

    (4) No voluntary employee contributions are made by the participant 
under any defined benefit or defined contribution plan.
    (5) No mandatory employee contributions are made by the participant 
under any defined contribution plan.
    (d) Limitation year for aggregated plans. If the plans which are 
aggregated under this section have different limitation years, 
subparagraph (1) or (2) of this paragraph must be complied with.
    (1) The relevant employer or employers must elect the limitation 
year that is to be controlling. This election shall be made by the 
adoption of a written resolution by the employer or employers. See Sec. 
1.415-2(b)(4) for rules relating to a change in the limitation year.
    (2) The employer or employers may continue to use different 
limitation years for each plan in accordance with rules determined by 
the Commissioner.

If, in accordance with paragraph (d)(1) of this section, one limitation 
year is elected, and if the plans which are aggregated covered at least 
one common participant prior to being aggregated, that limitation year 
shall be applicable for past years for purposes of computing the defined 
contribution fraction for those years. For special rules relating to the 
computation of the defined contribution plan fraction where records are 
not available for past periods, see Sec. 1.415-7(f).
    (e) The provisions of this section may be illustrated by the 
following examples:

    Example (1). J is an employee of two unrelated corporations, N and 
M. Each corporation has a qualified defined benefit plan in which J 
participates. Each plan provides a benefit which is equal to 75 percent 
of a participant's average compensation for his high 3 years of service 
and is payable in the form of a straight life annuity beginning at age 
65. J's average compensation (within the meaning of Sec. 1.415-2(d)) 
for his high three years of service from each corporation is $80,000. 
Each plan uses the calendar year for the limitation and plan year. In 
July, 1978, N Corporation becomes a wholly owned subsidiary of M 
Corporation, and as a result, J is treated as being employed by a single 
employer under section 414(b). Therefore, because section 415(f)(1)(A) 
requires that all defined benefit plans of an employer be treated as one 
defined benefit plan, the two plans must be aggregated for purposes of 
applying the limitations of section 415. (Although, under paragraph 
(a)(2) of this section, since the plans were not aggregated as of the 
first day of the 1978 limitation year (January 1, 1978), they will not 
be considered aggregated until the limitation year beginning January 1, 
1979.) As a result of such aggregation, J becomes entitled to a combined 
benefit which is equal to $120,000, which is in excess of the section 
415(b) dollar limitation for 1979 of $98,100. However, under paragraph 
(b) of this section, the limitations of section 415(b) and Sec. 1.415-3 
applicable to J may be exceeded in this situation without plan 
disqualification, so long as J's accrued benefit derived from employer 
contributions is not increased during the period within which the 
limitations are being exceeded.
    Example (2). A, age 30, owns all of the stock of X Corporation and 
also owns 10 percent of the stock of Z Corporation. F, A's father, 
directly owns 75 percent of the stock of Z corporation. Both 
corporations have qualified defined contribution plans in which A 
participates and both plans use the calendar year for the limitation and 
plan year. A's compensation (within the meaning of Sec. 1.415-6(a)(3)) 
for 1976 is $40,000 from Z Corporation and $150,000 from X Corporation. 
During 1976, annual additions of $10,000 are credited to A's account 
under the plan of Z Corporation, while annual additions of $26,825 are 
credited to A's account under the plan of X Corporation. In both 
instances, the amount of annual additions represent the maximum 
allowable under section 415(c) and Sec. 1.415-6. On July 15, 1976, F 
dies, and A inherits all of F's stock in Z in 1976. Because under 
section 414(b), A is considered to be in control of X and Z 
Corporations, the two plans must be aggregated for purposes of applying 
the limitations of section 415. However, even though A's total annual 
additions for 1976 are $36,825, the limitations of section 415(c) and 
Sec. 1.415-6 are not violated for 1976, because, under paragraph (a)(2) 
of this section, the two plans are considered separate plans for that 
year since they were not aggregated as of the first day of that year.

[T.D. 1718, 46 FR 1718, Jan. 7, 1981]