For applications submitted to conform to the 2020 RA List

Employee

Benefit

Plans

Explanation No. 13

Section 401(h) and 

Section 420

Determination Of 

Qualification

Note:

Plans submitted during the 2020 Required Amendment List 

submission period must satisfy the applicable changes in 

plan qualification requirements listed in Section IV of Notice 

2020-83, 2020-50 I.R.B. 1597 (the 2020 RA List).

This publication contains copies of:

Form 13069, Worksheet 13 

Form 13070, Deficiency Checksheet 13

These forms are included as examples only and should not 

be completed and returned to the Internal Revenue Service.

Publication 11433 (Rev. 6-2021) Catalog Number 48816E Department of the Treasury Internal Revenue Service www.irs.gov

The technical principles in this publication may be changed by 

future regulations or guidelines.

The purpose of Worksheet Number 13 (Form 13069) and this 

explanation is to identify major problems with respect to the 

requirements of Internal Revenue Code section 401(h) in plans 

with retiree medical benefit features and on plan provisions 

enabling the transfer of assets in a defined benefit plan to a 

health benefit account described in section 401(h), pursuant to 

section 420. However, there may be issues not mentioned in 

the worksheet that could affect the plan’s qualification.

This worksheet is to be completed if the applicant has 

specifically requested consideration of either section 401(h) or 

section 420, relating to transfers of assets in a defined benefit 

plan to a section 401(h) medical benefits account or to an 

applicable life insurance account under section 420(e)(4).

Generally, a “Yes” answer to a question on the worksheet 

indicates a favorable conclusion while a “No” answer signals 

a problem concerning the plan qualification. This rule may 

be altered by specific instructions for a given question. 

Please explain any “No” answer in the space provided on the 

worksheet. 

The sections cited at the end of each paragraph of explanation 

are to the Internal Revenue Code and the Income Tax 

Regulations.
Page 2 For applications submitted to conform to the 2020 RA List

I. Retiree Medical Benefits

Lines a. and b. When a determination under section 420 on the transfer of excess assets to retiree health accounts has been requested, 

the plan must contain provisions, including a health benefits account, that meet the requirements of section 401(h) in order for the plan 

to comply with section 420. Section 18 of Rev. Proc. 2021-4, 2021-1 I.R.B. 187 (as annually revised), describes the required information 

for making a section 401(h) and/or section 420 determination ruling request. Appendix C thereto contains a checklist of this required 

information to be submitted by an applicant seeking a section 401(h) and/or section 420 determination letter ruling.

Section 420(e)(3)

Lines c. and d. A pension or annuity plan may provide retiree medical benefits, through a section 401(h) account, including payment of 

benefits for sickness, accident, hospitalization and medical expenses. The plan must specify the medical benefits described in section 

401(h) which will be available and must contain provisions for determining the amount which will be paid. Other benefits may not be 

provided from a qualified account under section 401(h). The requirements of section 401(h) must be met with respect to any retiree medical 

account under a pension or annuity plan for such plan to qualify under sections 401(h) and section 401(a). 

Section 401(h); Treas. Regs. 1.401-1(b)(1)(i), 1.401-14(a) and (c)(1). 

Line e. The plan must provide that medical benefits are only provided for retired employees, their spouses and dependents. To be “retired” 

for purposes of eligibility to receive medical benefits described in section 401(h), an employee must be eligible to receive retirement benefits 

provided under the pension plan, or else be retired by an employer providing such medical benefits by reason of permanent disability. For 

purposes of the preceding sentence, an employee (even one who is past normal retirement age) is not considered to be “eligible to receive 

retirement benefits provided under the plan” if he is still employed by the employer and a separation from employment is a condition for 

receiving the retirement benefits. 

Although the specific requirements of sections 1.401(a)(4)-1 through -13 of the regulations directly apply to the retirement portion of a 

plan that provides medical benefits described under section 401(h), the portion of the plan that is providing the medical benefits described 

under section 401(h) must not discriminate in favor of highly compensated employees with respect to coverage and with respect to the 

contributions or benefits. 

Section 401 (h); Treas. Regs. 1.401-14(a), (b) (1) and (2) and 1.401(a)(4)-1(c)(14). 

Line f. Contributions to provide the medical benefits described in section 401(h) may either include or exclude employee contributions, 

without regard to whether the contributions to fund the retirement benefits are made on a similar basis. Thus, for example, the contributions 

to fund the medical benefits may be provided for entirely out of employer contributions even though the retirement benefits under the plan 

are determined on the basis of both employer and employee contributions or vice versa. 

II. Subordination – Retiree Medical Benefits

Line a. This requirement was codified in section 401(h) by the Omnibus Budget Reconciliation Act of 1989. The plan section or plan 

amendment adopting the medical benefits account should be reviewed to ensure that the plan language specifically provides that only 

contributions to the pension plan after the later of the adoption date or the effective date are considered when determining the maximum 

amount that can be contributed to the 401(h) medical benefits account under the subordination test. If the plan section or plan amendment 

references an effective date prior to the date the medical benefits account was established (the adoption date), the plan should be amended 

to reflect a date which is the later of the adoption date or the effective date. 

Under the subordination limitation, employer contributions to the pension plan to fund past service amortizations are disregarded when 

determining the maximum amount that can be contributed to the 401(h) medical benefits account under the subordination rule, and 

amounts paid for life insurance protection reduce the amount that may be contributed to the medical benefits account. 

Life insurance protection includes any benefit paid under the plan on behalf of an employee-participant as a result of the employeeparticipant’s death to the extent such payment exceeds the amount of the reserve to provide retirement benefits existing at his death. 

Life insurance protection also excludes any amounts transferred to or paid from an applicable life insurance account described in section 

420(e)(4).

(Treas. Reg. 1.401-14(c)(1) has not been revised to reflect the changes made by OBRA ‘89.) Section 401(h)(1) and Treas. Reg.. 1.401-

14(c)(1)(i). 

III. Separate Accounts – Retiree Medical Benefits

Line a. Where medical benefits described in section 401(h) are provided under a qualified pension or annuity plan, the plan must provide 

that a separate account must be established and maintained with respect to contributions to fund such benefits. The separation required by 

this section is for recordkeeping purposes only. Consequently, the funds in the medical benefits account need not be separately invested. 

Section 401(h)(2) and Treas. Reg. 1.401-14(c)(2). 
Page 3 For applications submitted to conform to the 2020 RA List

Lines b. and c. Separate accounts must also be established and maintained for each key employee (and his or her spouse and dependents) 

for whom medical benefits described in section 401(h) are provided under a qualified pension or annuity plan. The separation required 

by this section is for recordkeeping purposes only, and the funds in these accounts for key employees need not be separately invested.

Section 401(h)(6). 

IV. Reasonable And Ascertainable Provisions – Retiree Medical Benefits

Line a. The contributions for medical benefits provided by the section 401(h) account must be reasonable and ascertainable, and the plan 

must contain provisions for determining the amount which will be paid. These requirements will not be satisfied unless the terms of the plan 

specify the amount of benefits and the time period with respect to which benefits will be paid. Where there are other potential sources of 

payment of medical benefits such as a welfare benefit fund or the general funds of the employer, the plan must be specific as to how the 

benefits payable from the section 401(h) account are coordinated with benefits payable from other sources. The plan may not allow for 

employer discretion in the timing and amount of benefit payments. The employer must, at the time a contribution is made, designate that 

portion of such contribution allocable to the funding of medical benefits. 

Section 401(h)(3) and Treas. Reg. 1.401-14(c) (1) and (3). 

V. Miscellaneous – Retiree Medical Benefits

Line a. A plan which, for example, under its terms, permits funds in the retiree medical benefits account to be used for any retirement 

benefit provided under the plan does not satisfy the requirements of section 401(h) and will not qualify under section 401(a). However, the 

payment of any necessary or appropriate expenses attributable to the administration of the medical benefits account does not affect the 

qualification of the plan. 

Section 401(h)(4) and Treas. Reg. 1.401-14(c)(4). 

Line b. The plan must expressly provide that any amounts that are contributed to fund medical benefits described in section 401(h) and 

that remain in the medical benefits account upon the satisfaction of all liabilities arising out of the operation of the medical benefits portion 

of the plan are to be returned to the employer. 

Section 401(h)(5) and Treas. Reg. 1.401-14(c)(5). 

Line c. The plan must expressly provide that, in the event an individual’s interest in any amounts contributed to a 401(h) medical benefits 

account is forfeited before the plan terminates, an amount equal to the amount of the forfeiture must be applied as soon as possible to 

reduce employer contributions to fund the medical benefits. 

Treas. Reg. 1.401-14(c)(6).

VI. Applicable Life Insurance Benefits

Lines a. and b. When a determination under section 420 on the transfer of excess assets to an applicable life insurance benefits has been 

requested, the plan must contain provisions that meet the requirements of section 420.

Sections 420(a)(1) and 420(e)(4).

Lines c. and d. After July 6., 2012, a pension or annuity plan may transfer excess assets to an applicable life insurance account under 

section 420 to provide payment of benefits for group-term life insurance coverage for retirees who are entitled to receive such coverage 

by reason of retirement, but only to the extent that such coverage is provided under a policy for retired employees and the cost of such 

coverage is excludable from the retired employee’s income under section 79. The plan must specify the benefits which will be available 

and must contain provisions for determining the premiums which will be paid. Other benefits may not be provided from an applicable life 

insurance account. 

Section 420(c)(1).

Line e. The plan must provide that applicable life insurance premiums are only provided for retired employees. To be “retired” for purposes 

of eligibility for applicable life insurance benefits described in section 420(e)(1)(D), an employee must be eligible to receive retirement 

benefits provided under the pension plan. For purposes of the preceding sentence, an employee (even one who is past normal retirement 

age) is not considered to be “eligible to receive retirement benefits provided under the plan” if he is still employed by the employer and a 

separation from employment is a condition for receiving the retirement benefits. 

Line f. Section 401(h) does not provide for employee or employer contributions to fund applicable life insurance benefits. These benefits 

are only available if a transfer is made to an applicable life insurance account under section 420. 

Sections 401(h) and 420.
Page 4 For applications submitted to conform to the 2020 RA List

VII. Separate Account – Applicable Life Insurance Benefits

Line a. Where applicable life insurance benefits described in section 420(e)(1)(D) are provided under a qualified pension or annuity plan, 

the plan must provide that a separate account must be established and maintained with respect to contributions to fund such benefits. The 

separation required by this section is for recordkeeping purposes only. Consequently, the funds in the medical benefits account need not 

be separately invested. 

Section 420(e)(4).

Lines b. and c. Benefits for key employees (as defined in section 416(i)) cannot be included in amounts transferred to applicable life 

insurance accounts or in life insurance premiums paid from applicable life insurance accounts.

Sections 420(c)(1), 420(e)(D), and 420(e)(1)(E). 

VIII. Additional Provisions For Section 420 Transfers

Lines a. and b. If excess pension assets are transferred to a 401(h) medical benefits account or an applicable life insurance account under 

section 420, the plan must provide that the accrued pension benefits of any participant or beneficiary under the plan become nonforfeitable 

in the same manner which would be required if the plan had terminated immediately before the qualified transfer (or, in the case of a 

participant who separated during the 1-year period ending on the date of the transfer, immediately before such separation). 

Section 420(c)(2).

Lines c. and d. Any assets transferred to a 401(h) medical benefits account or an applicable life insurance account which are not used to 

pay qualified current retiree liabilities (other than liabilities of key employees) for the taxable year of the transfer (whether directly or through 

reimbursement) shall be transferred out of the account to the transferor plan.

In the case of a qualified future transfer or collectively bargained transfer to which section 420(f) applies, any assets transferred to the 

401(h) medical benefits account or applicable life insurance account may also be used to pay benefits described in section 420(f)(2). 

However, section 420(f)(2)(B)(ii) states that if the plan’s funded status falls below specified levels, either the employer maintaining the 

plan must make a contribution to the plan or amounts must be transferred from the 401(h) medical benefits account or the applicable life 

insurance account to restore the plan’s funded status. 

Section 420(f)(2)(B). 
For applications submitted to conform to the 2020 RA List

Employee Benefit Plan 

Sections 401(h) and 420 

(Worksheet Number 13 – Determination of Qualification)

Form 13069 (Rev. 6-2021) Catalog Number 31858W publish.no.irs.gov Department of the Treasury - Internal Revenue Service

Instructions – All items must be completed. A “Yes” answer generally indicates a favorable conclusion is warranted, while a “No” 

answer indicates a problem exists. Please use the space on the worksheet to explain any “No” answer. Numbers in brackets refer to 

EDS paragraph numbers. See Publication 11433, Explanation Number 13, for guidance in completing this form.

The technical principles in this worksheet may be changed by future regulations or guidelines.

Name of plan

I. Retiree Medical Benefits Plan Reference Yes No N/A

a. Has the applicant requested consideration under section 401(h) or 420 relative to

retiree medical benefits? (If “Yes,” see section 18 and appendix of Rev. Proc.

2021-4, 2021 I.R.B. 187, and complete the remainder of this worksheet. If “No,” go

to section VI of this worksheet.) [1375]

b. Does the plan contain a medical benefits account within the meaning of section 401

(h)? (If “Yes,” complete the remainder of this worksheet. If “No,” secure

amendments to include the section 401(h) account provisions or request an

explanation from the applicant and go to Section VI of this worksheet.) [1375]

c. Is the section 401(h) medical benefits account part of a pension or annuity plan

(including a money purchase pension plan)? [1376]

d. Does the plan specify the medical benefits that will be available and contain

provisions for determining the amount that will be paid? [1376]

e. Does the medical benefits account specify who will benefit and limit eligible persons

to retired employees, their spouses and their dependents? [1377]

f. Does the plan specify either that contributions to the medical benefits account are

provided entirely from employer contributions or that they will be paid from employer

and employee contributions? [1378]

II. Subordination – Retiree Medical Benefits Plan Reference Yes No N/A

a. Does the plan provide that retiree medical benefits are subordinate to the retirement

benefits such that the aggregate actual contributions for medical benefits, when

added to actual contributions for life insurance protection under the plan (excluding

any amounts transferred to or paid from an applicable life insurance account, if

applicable), do not exceed 25 percent of the total actual contributions to the plan

(other than contributions to fund past service credits) after the later of the adoption

or effective date of the plan amendment establishing the section 401(h) account?

[1379]

III. Separate Accounts – Retiree Medical Benefits Plan Reference Yes No N/A

a. Does the plan provide that the section 401(h) arrangement for retiree medical

benefits is a separate account established and maintained for such benefits? [1380]

b. Does the plan provide that in the case of an employee who is a key employee, a

separate account is established and maintained for retiree medical benefits payable

to such employee (and his spouse and dependents) and such benefits (to the extent

attributable to plan years beginning after March 31, 1984, for which the employee is

a key employee) are only payable to such employee (and his spouse and

dependents) from such separate account? [1381]

c. Does the plan provide that the term “key employee” means any employee, who at

any time during the plan year or any preceding plan year during which contributions

were made on behalf of such employee, is or was a key employee as defined in

section 416(i)? [1381]

IV. Reasonable and Ascertainable Provisions – Retiree Medical Benefits Plan Reference Yes No N/A

a. Does the plan provide for employer contributions to the medical benefits account

that are reasonable and ascertainable? [1382]

This form is provided as an example only and should not be 

completed or returned to the Internal Revenue Service
Page 2 For applications submitted to conform to the 2020 RA List

Form 13069 (Rev. 6-2021) Catalog Number 31858W publish.no.irs.gov Department of the Treasury - Internal Revenue Service

V. Miscellaneous – Retiree Medical Benefits Plan Reference Yes No N/A

a. Does the plan provide that it is impossible, at any time prior to the satisfaction of all 

liabilities under the plan to provide section 401(h) medical benefits, for any part of 

the corpus or income of such separate account to be (within the taxable year or 

thereafter) used for, or diverted to, any purpose other than the providing of such 

benefits? [1383]

b. Does the plan expressly provide that, notwithstanding the provisions of section 

401(a)(2), upon the satisfaction of all liabilities under the plan to provide section 

401(h) medical benefits, any amount remaining in such separate account must be 

returned to the employer? [1384]

c. Does the plan expressly provide that, in the event an individual’s interest in the 

medical benefits account is forfeited prior to termination of the plan, an amount 

equal to the amount of the forfeiture must be applied as soon as possible to reduce 

employer contributions to fund the medical benefits? [1385]

VI. Applicable Life Insurance Benefits Plan Reference Yes No N/A

a. Has the applicant requested consideration under section 420 relative to applicable 

life insurance benefits? (If “Yes,” see section 420, and complete the remainder of 

this worksheet. If “No,” go to section VIII of this worksheet.) [1386] 

b. Does the plan contain an applicable life insurance account within the meaning of 

section 420? (If “Yes,” complete the remainder of this worksheet. If “No,” secure 

amendments to include the applicable life insurance account provisions or request 

an explanation from the applicant.) [1387]

c. Is the applicable life insurance account part of a pension or annuity plan (including a 

money purchase pension plan)? [1388, 1389]

d. Does the plan specify the life insurance benefits that will be available and contain 

provisions for determining the premiums that will be paid? [1388, 1389]

e. Does the applicable life insurance account specify who will benefit and limit eligible 

persons to retired employees who are entitled to group-term life insurance coverage 

by reason of retirement, but only to the extent that such coverage is provided under 

a policy for retired employees and the cost of such coverage is excludable from the 

retired employee’s gross income under section 79 of the Code? [1390]

f. Does the plan specify that the applicable life insurance account will be funded by 

means of transfers of excess pension assets in accordance with section 420, and 

that no employer or employee contributions will be made to such account? [1391]

VII. Separate Account – Applicable Life Insurance Benefits Plan Reference Yes No N/A

a. Does the plan provide that the section 420 applicable life insurance account is a 

separate account established and maintained for such benefits? [1392]

b. Does the plan provide that the 420 applicable life insurance account is not to be 

used to pay life insurance premiums for an employee who is a key employee? [1393, 

1394]

c. Does the plan provide that the term “key employee” means any employee, who at 

any time during the plan year during which applicable life insurance premiums are 

paid or any preceding plan year was a key employee as defined in section 416(i)? 

[1393, 1394] 

VIII. Additional Provisions for Section 420 Transfers Plan Reference Yes No N/A

a. Has the applicant requested consideration for a transfer under section 420 with 

respect to either retiree medical benefits or applicable life insurance benefits? (If 

“Yes,” complete the remainder of this worksheet. If “No,” do not complete the 

remainder of this worksheet.) [1395] 

b. Does the plan provide that for any participant or beneficiary under the plan, the 

benefits that had accrued before a transfer to a 401(h) medical benefits account or 

an applicable life insurance account become nonforfeitable to the extent required 

under section 420(c)(2))? [1396]

This form is provided as an example only and should not be 

completed or returned to the Internal Revenue Service
Page 3 For applications submitted to conform to the 2020 RA List

Form 13069 (Rev. 6-2021) Catalog Number 31858W publish.no.irs.gov Department of the Treasury - Internal Revenue Service

VIII. Additional Provisions for Section 420 Transfers – Continued Plan Reference Yes No N/A

c. Does the plan expressly provide that, except as provided in section 420(f) for 

collectively bargained transfers, any assets transferred to a health benefits account 

or applicable life insurance account (and any income allocable thereto) will be 

returned to the transferor plan to the extent they are not used to pay qualified 

current retiree medical or life insurance benefits, respectively, for the taxable year of 

the transfer (in the case of a qualified transfer under section 420(b)(1)) or to the 

extent needed to comply with the requirement to maintain the plan’s funded status 

under section 420(f)(2)(B) (in the case of a qualified future transfer under section 

420(f)(2)(A))? [1397]

d. In the case of a collectively bargained plan, does the plan expressly provide that 

any collectively bargained transfers described in section 420(f)(2)(E) to a 401(h) 

medical benefits account or applicable life insurance account are only to be used to 

pay benefits for collectively bargained liabilities as described in section 420(f)(6)(B), 

and will be returned to the transferor plan to the extent needed to comply with the 

requirement to maintain funded status under section 420(f)(2)(B)? [1398]

This form is provided as an example only and should not be 

completed or returned to the Internal Revenue Service
For applications submitted to conform to the 2020 RA List

Form 13070 (Rev. 6-2021) Catalog Number 31859H publish.no.irs.gov Department of the Treasury - Internal Revenue Service

Employee Plan Deficiency Checksheet

Attachment Number 13

Sections 401(h) and 420

For IRS Use Please furnish the amendment(s) requested in the section(s) checked below.

1375

I.a., b.

For a section 420 transfer of excess assets to retiree health accounts, the plan must be amended to include 

provisions for a medical benefits account within the meaning of section 401(h). IRC section 420(e)(3).

1376

I.c., d.

A pension or annuity plan containing a section 401(h) account may only provide medical benefits including 

payment of benefits for sickness, accident, hospitalization and medical expenses. Section of the plan 

should be amended to specify the medical benefits that will be available, the amount that will be paid and when 

the payments will occur. IRC section 401(h); Treasury Regs. 1.401-1(b)(1)(i); 1.401-14(a) and (c)(1).

1377

I.e.

Section of the plan should be amended to specify who is eligible to receive medical benefits from the 

section 401(h) account. Note that benefits may only be provided to retired employees, their spouses and their 

dependents. IRC section 401(h); Treasury Regs. 1.401-14(a), (b)(1) and (b)(2).

1378

I.f.

Section of the plan should be amended to provide whether contributions to the section 401(h) account

are provided entirely from employer contributions or whether they will be paid from employer and employee 

contributions. Treasury Reg. 1.401-14(b)(3). 

1379

II.a.

Section of the plan should be amended to provide that the aggregate actual contributions for retiree 

medical benefits, when added to the actual contributions for life insurance under the plan (excluding amounts 

transferred to or paid from any applicable life insurance account), are limited to 25 percent of the total actual 

contributions made to the plan (other than contributions to fund past service credits) after the later of the 

adoption or effective date of the section 401(h) arrangement (note that the date of adoption is the date the 

employer signs or executes the section 401(h) amendment). IRC section 401(h); Treasury Reg. 1.401-14(c)(1)

(i).

1380

III.a.

Section of the plan should be amended to provide that a separate account is established and 

maintained with respect to contributions to fund medical benefits under the section 401(h) arrangement. IRC 

section 401(h)(2); Treasury Reg. 1.401-14(c)(2).

1381

III.b., c.

Section of the plan should be amended to provide that in the case of an employee who is a key 

employee (as defined in IRC section 416(i)), a separate account is established and maintained for medical 

benefits payable to such employee (and his or her spouse and dependents) and such benefits (to the extent 

attributable to plan years beginning after March 31, 1984, for which the employee is a key employee) are only 

payable to such employee (and his or her spouse and dependents) from such separate account. IRC section 

401(h)(6).

1382

IV.a.

Section of the plan should be amended to provide that the employer’s contributions to the medical 

benefits account are reasonable and ascertainable and that the employer must, at the time a contribution is 

made, designate that portion of such contribution allocable to the funding of medical benefits. In addition, 

section of the plan should be amended to specify the amounts of benefits, the priority and the time 

period with respect to which benefits will be paid from each source, when other sources of payment for such 

medical benefits exist, such as a welfare benefit fund (for example, a section 501(c)(9) voluntary employees 

beneficiary association) or the general funds of the employer. IRC section 401(h)(3); Treasury Reg. 1.401-14(c)

(1) and (3).

1383

V.a.

Section of the plan should be amended to provide that it is impossible, at any time prior to the 

satisfaction of all liabilities under the plan to provide section 401(h) medical benefits, for any part of the corpus 

or income of such separate account to be (within the taxable year or thereafter) used for, or diverted to, any 

purpose other than the providing of such benefits. IRC section 401(h)(4); Treasury Reg. 1.401-14(c)(4).

1384

V.b.

Section of the plan should be amended to provide, notwithstanding the provisions of section 

401(a)(2), that upon the satisfaction of all liabilities under the plan to provide section 401(h) medical benefits, 

any amount remaining in such separate account must be returned to the employer. IRC section 401(h)(5); 

Treasury Reg. 1.401-14(c)(5).

1385

V.c.

Section of the plan should be amended to provide that in the event an individual’s interest in the 

medical benefits account is forfeited prior to termination of the plan an amount equal to the amount of the 

forfeiture must be applied as soon as possible to reduce employer contributions to fund the medical benefits. 

Treasury Reg. 1.401-14(c)(6). 

1387

VI.b.

For a section 420 transfer of excess assets to applicable life insurance health accounts, the plan must be 

amended to include provisions for an applicable life insurance account within the meaning of section 420(e)(4).

This form is provided as an example only and should not be 

completed or returned to the Internal Revenue Service
For applications submitted to conform to the 2020 RA List

Form 13070 (Rev. 6-2021) Catalog Number 31859H publish.no.irs.gov Department of the Treasury - Internal Revenue Service

1388, 1389

VI.c., d.

A pension or annuity plan containing an applicable life insurance account may only provide group-term life 

insurance coverage for retired employees, to the extent that such coverage is provided under a policy for retired 

employees and the cost of such coverage is excludable from the retired employee’s gross income under section 

79 of the Code. Section of the plan should be amended to specify the applicable life insurance 

benefits that will be available, the premiums that will be paid and when the payments will occur. IRC section 420

(e)(1)(D).

1390

VI.e.

Section of the plan should be amended to specify who is eligible to have applicable life insurance 

premiums paid on their behalf from the applicable life insurance account. Note that life insurance premiums may 

only be paid for retired employees, who, immediately before the qualified transfer, are entitled to receive such 

coverage by reason of retirement. IRC section 420(e)(1)(D).

1391

VI.f.

Section of the plan should be amended to provide that the applicable life insurance account will be 

funded by means of transfers of excess pension assets in accordance with section 420, and that no employer or 

employee contributions will be made to such account. IRC Sections 401(h) and 420(e)(4). 

1392

VII.a.

Section of the plan should be amended to provide that a separate account is established and 

maintained with respect to transfers to fund applicable life insurance benefits under section 420. IRC section 

420(e)(4).

1393, 1394

VII.b., c.

Section of the plan should be amended to provide that the applicable life insurance account is not to 

be used to pay premiums for an employee who is a key employee (as defined in IRC section 416(i)). IRC 

sections 420(c)(1), 420(e)(1)(D) and 420(e)(1)(E).

1395

VIII.a., b.

Section of the plan should be amended to provide that for any participant or beneficiary under the 

plan, benefits that had accrued before a transfer to a 401(h) medical benefits account or applicable life 

insurance account become nonforfeitable to the extent required under section 420(c)(2). IRC section 420(c)(2).

1397

VIII.c.

Section of the plan should be amended to provide that (except as provided under section 420(f) for 

collectively bargained transfers), any assets transferred to a 401(h) medical benefits account or applicable life 

insurance account (and any income allocable thereto) will be returned to the transferor plan to the extent they 

are not used to pay qualified current retiree medical or life insurance benefits, respectively, for the taxable year 

of the transfer (in the case of a qualified transfer under section 420(b)(1)) or to the extent needed to comply with 

the requirement to maintain the plan’s funding status under section 420(f)(2)(B) (in the case of a qualified future 

transfer under section 420(f)(2)(A)). IRC section 420(c)(1)(B).

1398

VIII.d.

Section of the plan should be amended to provide that collectively bargained transfers described in 

section 420(f)(2)(E) to a 401(h) medical benefits account or an applicable life insurance account are only to be 

used to pay benefits for collectively bargained liabilities as described in section 420(f)(6)(B), and any amounts 

not so used will be returned to the transfer plan to the extent required under section 420(f)(2)(B). IRC section 

402(f)(2).

This form is provided as an example only and should not be 

completed or returned to the Internal Revenue Service