The IRS issued a Revenue Ruling (Revenue Ruling 2003-11) expected to be published on January 21, 2003 confirming that a qualified defined benefit pension plan may be amended to apply the $200,000 compensation limitation not only to benefits accrued for active employees on and after January 1, 2002, but also for former employees:

• who retired prior to January 1, 2002;
• who continue to have accrued benefits under the plan; and
• whose accrued benefits are limited by a prior compensation limitation.

This change is most advantageous to those employers who have a non-qualified deferred compensation plan that makes up amounts the qualified plan does not pay because of various IRS limits, including the compensation limits. It has the effect of allowing a shift of some or all of the payments from the non-qualified plan back to the qualified plan.