What is an Excess Benefit Plan? A Comprehensive Legal Overview

Q: Who can establish an excess benefit plan?

Any employer can establish an excess benefit plan for eligible employees.

Q: Are excess benefit plans regulated?

Yes, they are regulated under the Internal Revenue Code and ERISA.

Definition & Meaning

An excess benefit plan is a type of employer-sponsored plan designed to provide benefits to certain employees that exceed the contribution and benefit limits set by Section 415 of the Internal Revenue Code. This plan is specifically for employees whose benefits would otherwise be restricted by these limits. Importantly, the plan can be unfunded, meaning it does not require assets to be set aside to pay for the benefits. If a portion of a plan is identified as providing excess benefits, it is treated as a separate excess benefit plan.

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Legal Use & context

Excess benefit plans are primarily used in the context of employee benefits law. They are relevant for employers who wish to provide additional benefits to select employees, often high-level executives or key employees. These plans are governed by federal regulations, particularly those outlined in the Internal Revenue Code. Employers may utilize legal templates from resources like US Legal Forms to ensure compliance when establishing such plans.

Key legal elements

Real-world examples

Here are a couple of examples of abatement:

Example 1: A corporation establishes an excess benefit plan for its top executives, allowing them to receive retirement benefits that exceed the federal limits. This plan is designed to attract and retain talent.

Example 2: A small business offers an excess benefit plan to a key employee who has reached the maximum contribution limits in their standard retirement plan, ensuring they can still receive additional retirement benefits. (hypothetical example)

Relevant laws & statutes

Key statutes related to excess benefit plans include:

Internal Revenue Code Section 415 - limits on contributions and benefits for qualified retirement plans.
Employee Retirement Income Security Act (ERISA) - governs the establishment and management of employee benefit plans.

Comparison with related terms

Term	Definition	Key Differences
Qualified Plan	A retirement plan that meets IRS requirements for tax benefits.	Excess benefit plans exceed IRS limits, while qualified plans do not.
Non-Qualified Plan	A retirement plan that does not meet IRS requirements for tax benefits.	Excess benefit plans are a type of non-qualified plan specifically for excess benefits.

Common misunderstandings

What to do if this term applies to you

If you are an employer considering an excess benefit plan, it is essential to consult with a legal professional to ensure compliance with federal regulations. You can also explore US Legal Forms for ready-to-use legal templates that can help you set up the plan correctly. If you are an employee potentially affected by such a plan, review your benefits package and consult with your HR department for more information.

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Quick facts

Attribute	Details
Typical Users	Employers and select employees
Regulatory Body	Internal Revenue Service (IRS)
Funding Status	Can be funded or unfunded
Primary Law	Internal Revenue Code Section 415

Key takeaways

Frequently asked questions

What is the purpose of an excess benefit plan?

The purpose is to provide additional benefits to certain employees that exceed federal limits.