eligible combined plan
(2) Eligible combined plan For purposes of this subsection— (A) In general The term “eligible combined plan” means a plan— (i) which is maintained by an employer which, at the time the plan is established, is a small employer, (ii) which consists of a defined benefit plan and an applicable individual account plan each of which qualifies under section 401(a) of title 26 , (iii) the assets of which are held in a single trust forming part of the plan and are clearly identified and allocated to the defined benefit plan and the applicable individual account plan to the extent necessary for the separate application of this chapter under paragraph (1), and (iv) with respect to which the benefit, contribution, vesting, and nondiscrimination requirements of subparagraphs (B), (C), (D), (E), and (F) are met. For purposes of this subparagraph, the term “small employer” has the meaning given such term by section 4980D(d)(2) of title 26 , except that such section shall be applied by substituting “500” for “50” each place it appears. (B) Benefit requirements (i) In general The benefit requirements of this subparagraph are met with respect to the defined benefit plan forming part of the eligible combined plan if the accrued benefit of each participant derived from employer contributions, when expressed as an annual retirement benefit, is not less than the applicable percentage of the participant’s final average pay. For purposes of this clause, final average pay shall be determined using the period of consecutive years (not exceeding 5) during which the participant had the greatest aggregate compensation from the employer. (ii) Applicable percentage For purposes of clause (i), the applicable percentage is the lesser of— (I) 1 percent multiplied by the number of years of service with the employer, or (II) 20 percent. (iii) Special rule for applicable defined benefit plans If the defined benefit plan under clause (i) is an applicable defined benefit plan as defined in section 1053(f)(3)(B) of this title which meets the interest credit requirements of section 1054(b)(5)(B)(i) of this title , the plan shall be treated as meeting the requirements of clause (i) with respect to any plan year if each participant receives pay credit for the year which is not less than the percentage of compensation determined in accordance with the following table: If the participant’s age as of the beginning of the year is— The percentage is— 30 or less 2 Over 30 but less than 40 4 40 or over but less than 50 6 50 or over 8. (iv) Years of service For purposes of this subparagraph, years of service shall be determined under the rules of paragraphs (1), (2), and (3) of section 1053(b) of this title , except that the plan may not disregard any year of service because of a participant making, or failing to make, any elective deferral with respect to the qualified cash or deferred arrangement to which subparagraph (C) applies. (C) Contribution requirements (i) In general The contribution requirements of this subparagraph with respect to any applicable individual account plan forming part of an eligible combined plan are met if— (I) the qualified cash or deferred arrangement included in such plan constitutes an automatic contribution arrangement, and (II) the employer is required to make matching contributions on behalf of each employee eligible to participate in the arrangement in an amount equal to 50 percent of the elective contributions of the employee to the extent such elective contributions do not exceed 4 percent of compensation. Rules similar to the rules of clauses (ii) and (iii) of section 401(k)(12)(B) of title 26 shall apply for purposes of this clause. (ii) Nonelective contributions An applicable individual account plan shall not be treated as failing to meet the requirements of clause (i) because the employer makes nonelective contributions under the plan but such contributions shall not be taken into account in determining whether the requirements of clause (i)(II) are met. (D) Vesting requirements The vesting requirements of this subparagraph are met if— (i) in the case of a defined benefit plan forming part of an eligible combined plan an employee who has completed at least 3 years of service has a nonforfeitable right to 100 percent of the employee’s accrued benefit under the plan derived from employer contributions, and (ii) in the case of an applicable individual account plan forming part of eligible combined plan— (I) an employee has a nonforfeitable right to any matching contribution made under the qualified cash or deferred arrangement included in such plan by an employer with respect to any elective contribution, including matching contributions in excess of the contributions required under subparagraph (C)(i)(II), and (II) an employee who has completed at least 3 years of service has a nonforfeitable right to 100 percent of the employee’s accrued benefit derived under the arrangement from nonelective contributions of the employer. For purposes of this subparagraph, the rules of section 1053 of this title shall apply to the extent not inconsistent with this subparagraph. (E) Uniform provision of contributions and benefits In the case of a defined benefit plan or applicable individual account plan forming part of an eligible combined plan, the requirements of this subparagraph are met if all contributions and benefits under each such plan, and all rights and features under each such plan, must be provided uniformly to all participants. (F) Requirements must be met without taking into account social security and similar contributions and benefits or other plans (i) In general The requirements of this subparagraph are met if the requirements of clauses (ii) and (iii) are met. (ii) Social security and similar contributions The requirements of this clause are met if— (I) the requirements of subparagraphs (B) and (C) are met without regard to section 401(l) of title 26, and (II) the requirements of sections 401(a)(4) and 410(b) of title 26 are met with respect to both the applicable defined contribution plan and defined benefit plan forming part of an eligible combined plan without regard to section 401(l) of title 26. (iii) Other plans and arrangements The requirements of this clause are met if the applicable defined contribution plan and defined benefit plan forming part of an eligible combined plan meet the requirements of sections 401(a)(4) and 410(b) of title 26 without being combined with any other plan.