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February 16, 2009

Paired plan



More than one standardized plans maintained by the same employer ( plan sponsor), so as to coordinate certain provisions. For instance, a plan sponsor would pair a money purchase pension plan and a profit sharing plan to get the following benefits:

  1. The ability to deduct up to the maximum of 25% of compensation, which is permitted under a money purchase pension plan, but until  plan years that began 01/01/2002, was limited to 15% under a profit sharing plan
  2. The flexibility of funding that was permitted under a profit sharing plan


The deductibility limit for profit sharing plans was increased to 25% under EGTRRA, which negated the need for paired plans

Referring Cite

Defined Contribution Listing of Required Modifications and Information Package (LRM) [8-2005]; Defined Benefit LRM and Information Package (LRM) [2-2000]

Additional Helpful Information

  • Revenue Procedure 2000-20 defines “Paired plans” as follows “ … either a combination of two or more defined contribution standardized plans or a combination of one or more defined contribution standardized plans and one defined benefit standardized plan (for example, a money purchase pension plan, a profit-sharing plan and a unit benefit or flat benefit pension plan), so designed that if any single plan, or combination of plans, is adopted by an employer, each plan by itself, or the plans together, will meet the nondiscrimination rules set forth in § 401(a)(4), the contribution and benefit limitations set forth in § 415, and the top-heavy provisions set forth in § 416. Paired plans must have the same sponsor. In addition, only one of the paired plans that an employer adopts may provide for disparity in contributions or benefits that is permitted under § 401(l). If one of the paired plans is a defined benefit plan that includes a final pay limitation as described in § 401(a)(5)(D), then the paired defined contribution plan(s) may not provide for disparity in contributions.”
  • Under Revenue Procedure 2005-16, paired standardized plans are discontinued as separate categories of master & prototype  plans.

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