3726 / What special qualification requirements apply to defined contribution plans?
A defined contribution plan must contain a limitation on the amount of “annual additions” that may be credited to a participant’s account each year, or, if an employer has more than one plan, to all accounts of all defined contribution plans of the employer ( Q 3728, Q 3868). The plan must require a separate accounting for each employee’s benefit under the plan.1
A defined contribution plan may not exclude from participation in the plan employees who are beyond a specified age.2
Hybrid plans, which combine the features of defined contribution plans and defined benefit plans, are treated as defined contribution plans to the extent that benefits are based on the individual account. One type of hybrid plan is the target benefit plan ( Q 3734). The participant’s target benefit is calculated according to a formula, and an actuary determines the contribution necessary to reach this target by retirement age. This amount is allocated to the participant’s account.