IRS and Treasury have issued an announcement (Notice 2009-71) that they will soon issue guidance on “eligible combined plans” under Section 414(x) of the Internal Revenue Code. This section allows an employer to maintain both a defined contribution plan and a defined benefit plan on a combined basis, thus potentially reducing the administrative burdens and costs of maintaining two separate plans.

Section 414(x) was added by the Pension Protection Act of 2006 and revised by the Worker, Retiree and Employer Recovery Act of 2008.

To meet the requirements of Section 414(x), an “eligible combined plan” must be established by “a small employer.” For this purpose, a small employer generally means an employer who employed an average of fewer than 500 employees during the preceding calendar year.

Code Section 414(x) becomes effective for plan years beginning after December 31, 2009. More details will be provided as they become available.