A defined-contribution plan provides an individual account and benefits based on amounts contributed or allocated to that account, adjusted for income, expenses, gains, and losses. That definition does not make every defined-contribution plan a 401(k), nor does it decide §412. Apply the coverage, property, handling, exemption, amount, and form sequence to the actual design. 29 U.S.C. §1002(2), (34) 29 U.S.C. §1112
Use the §412 decision sequence
- 1Identify the actual retirement arrangement and confirm an employee pension benefit plan exists.
- 2Test Title I coverage, then Part 4 applicability.
- 3Identify the plan’s funds or other property.
- 4Identify each natural person whose functions constitute handling.
- 5Test exemptions separately for each person or institution.
- 6Calculate each nonexempt handler’s amount and review compliant form, live surety, and current reporting materials.
Identify the design before applying the common test
A defined-contribution umbrella includes designs with materially different contribution terms, but §412 still asks whether Title I and Part 4 apply, what plan property exists, and who handles it. A plan with elective deferrals routes to the 401(k) guide; discretionary profit-sharing facts route to the profit-sharing guide; and employer securities or a stock-bonus question routes to the ESOP guide. 29 U.S.C. §1002 29 U.S.C. §1112
Money-purchase and target-benefit designs
IRS Publication 560 describes a money-purchase pension plan as a defined-contribution plan with contributions stated in the plan document. Fixed contribution terms do not create a different fidelity bond formula; the ordinary property and handler analysis still controls. IRS Publication 560 29 U.S.C. §1112
An older arrangement labeled “target-benefit” should be reviewed from its governing document rather than classified from the name. It is commonly associated with money-purchase/defined-contribution design, but an ambiguous document or classification should go to benefits counsel. The label creates no special §412 rule. IRS Publication 560 29 U.S.C. §1002
Facts that change the answer
- The governing document's actual design—including whether it has elective deferrals, discretionary or fixed contributions, or an employer-securities feature. IRS Publication 560
- Title I and Part 4 status, including employee-census facts rather than an owner-only product name. 29 U.S.C. §1003 29 U.S.C. §1101 29 C.F.R. §2510.3-3(b)–(c)
- Contributions, account assets, and other plan property actually present, plus each person's authority over receipts, transfers, investments, and distributions. FAB 2008-04, Q5–Q8 and Q17–Q21
- Actual employer-security holdings. If that question exists, use the ESOP guide rather than assuming a $1 million amount from a design label. The $1 million figure is the ordinary maximum, not an automatic amount; the Secretary may prescribe an amount over the ordinary $500,000 maximum after notice and an opportunity for hearing, but not over 10% of funds handled. 29 U.S.C. §1112
- Any exemption for a particular handler or institution, while separately testing every other handler. 29 C.F.R. Part 2580, Subpart F
Example: fixed contributions do not change the handler test
Assume a private money-purchase plan covering common-law employees holds investments at a trust company. One sponsor employee can release distributions, while another only prepares reports and has no access or final authority. The fixed contribution formula does not decide bonding. Test the first employee's release authority under the handling rule and do not classify the second by job title alone; also test whether the trust company has a person-specific exemption. 29 C.F.R. §2580.412-6 29 C.F.R. Part 2580, Subpart F
Handling is functional and person-specific. Custody, transfer power, disbursement or signature authority, final authority over investments or payments, and supervision of those functions can create a risk of loss. A fiduciary, officer, trustee, or provider title is not dispositive, and controls are relevant to whether handling exists rather than an independent exemption. 29 C.F.R. §2580.412-6 FAB 2008-04, Q5–Q8 and Q18–Q21
Apply the shared amount and form rules next
The employer-securities fork above is the only amount issue this guide owns. For each nonexempt handler's calculation, continue to the coverage calculation guide. Then use the requirements guide for bond form, surety, and filing-year reporting review. FAB 2008-04, Q22–Q25 and Q35–Q40
Methodology and legal boundary
This guide applies the federal ERISA §412 sequence to a plan category; it does not interpret a particular plan document, determine worker status, decide governmental or church affiliation, classify an ambiguous target-benefit design, or approve a bond form or surety. Use current documents, census and authority records, and obtain benefits counsel for unresolved classification facts. 29 U.S.C. §1002 29 U.S.C. §1003 29 U.S.C. §1101 29 U.S.C. §1112