3815 / Can an existing defined benefit plan be converted into a fully insured (412(i)) plan?

An existing defined benefit plan can be converted to a fully insured plan, and the requirement that payment of level annual premiums commence with the beginning of plan participation will be considered satisfied, if:

(1) the plan otherwise satisfies the requirements under IRC Sections 412(e)(3), 403(a), and 404(a)(2) for the plan year containing the conversion date;

(2) all benefits accruing for each participant on and after the conversion date are funded by level annual premium contracts under which payments begin at the time when the increased accrual becomes effective and end not later than the individual’s normal retirement age;

(3) all benefits accrued for each participant prior to the conversion date are guaranteed through insurance or annuity contracts, the purchase price of which equals the minimum amount required by the life insurance company for a contract that guarantees to provide the accrued benefits, including any optional forms of
benefit;