The document discusses regulations issued by the IRS regarding qualifying as a separate line of business (SLOB) for nondiscrimination pension plan rules. The SLOB regulations allow employers to be tested separately for minimum coverage and participation requirements if certain criteria are met. There are three main tests to qualify as a SLOB: 1) Designating separate lines of business, 2) Proving organizational and operational independence of each line, and 3) Meeting statutory requirements including employing at least 50 employees in each line and meeting an administrative scrutiny test. The regulations provide detailed guidance on how to satisfy each of the tests to qualify for SLOB treatment.

1. Qualifying as a separate line of business for
nondiscrimination pension plan rules.
The IRS recently issued final regulations for determining whether or not an employer can be treated
like a SLOB (T.D. 8376, December 2, 1991). As negative as the acronym -- "SLOB -- may sound, many
employers are striving to be regarded by the IRS as operating as "qualified SLOBs," or qualified
separate lines of business.
The SLOB regulations are critical for purposes of testing minimum coverage and participation
requirements for qualified retirement plans under sections 410(b) and 401(a)(26) of the Internal
Revenue Code, respectively. In general, sections 410(b) and 401(a)(26) require employers to
compare participation by, and the level of benefits provided to, highly compensated employees with
that of nonhighly compensated employees on an employer-wide basis. If the SLOB criteria are met,
however, these tests are applied separately to each of the employer's qualified separate lines of
business instead of to the employer as a single entity.
Under the final regulations, the employer is allowed to exercise its discretion in determining the
separation of its lines of business. Additionally, the employer is provideed with greater freedom to
compete effectively with similar industries in the areas of employee compensation without the
danger of discrimination against a group of employees who are employed in a separate division of
the employer's operations. Finally, the constraints placed upon the employer to qualify for SLOB
treatment are more objective than previous requirements under section 414(r) because the
regulations contain more definitive and numerical guidelines.
This article discusses the general criteria established by the IRS in the final section 414(r)
regulations, illustrates the application of some of the criteria to an employer's organization to
establish qualification under the SLOB rules, and reviews the advantages and disadvantages that an
employer faces with the promulgation of these provisions.
I. SECTION 414(r): SPECIAL RULES FOR
SEPARATE LINES OF BUSINESS
Section 414(r) provides guidance regarding special rules for qualifying for separate line of business
treatment. Generally, the employer must have "bona fide business reasons" for operating these
separate lines of business. (1) (*) All property and services provided by the employer to its
customers must be available exclusively through the lines of business with no remainder of the
employer's operations existing outside of the separate lines. (2)

2. III. GUIDANCE PROVIDED BY TREAS.
REG. [section] 1.414(r)
In order to meet the standard established by
section 414(r), an employer must meet the
specific requirements contained in Treas.
[subsection] 1.414(r)-1 through 1.414(r)-11, as
well as rules provided under sections 410(b),
401(a)(26), and 129(d)(8). (3) The regulations
apply to plan years and testing years beginning on
or after January 1, 1992. (4) For plan years
beginning before this date but after 1986 (when section 414(r) was enacted), an employer qualifies
as operating separate lines of business if the employer "reasonably determines" that it meets the
requirements of section 414(r) (other than the requirements of administrative scrutiny under section
414(r)(2)(C)), or complies with the terms of the regulations under that section (with the same
exception of the administrative scrutiny requirement). (5)
In general, the tests presented in Treas. Reg. [section] 1.414(r) for the satisfaction of these
requirements are three-tiered:
(1) The employer must designate its lines of business.
(2) The employer must prove the organizational and operational independence of each line of
business.
(3) The employer must meet three statutory requirements:
(a) each line of business must employ at least 50 employees;
(b) the employer must notify the Secretary of the Treasury of its intentions for operations under
separate lines of business; and
(c) each line must survive administrative scrutiny, which includes six safe harbor rules, or the
employer must obtain an individual determination from the IRS Commissioner.
A flowchart of these major provisions is provided in the regulations. (See Table 1 on page 123.)
III. TEST 1: DESIGNATING SEPARATE
LINES OF BUSINESS
The first test of separateness of business lines provides the employer with more breadth and
flexibility than any of the others. It is a more subjective process, because it contains no specific
numeric or other restrictive requirements. In a two-step process, the employer designates its lines of
business by first identifying all of the services and property it provides to customers during the
testing year and then determining what portion of the property and services is provided by each line
of business. (6) The "testing year" referred to in the regulation is the calendar year. (7)

3. A. Identification of Property and
Services Provided to Customers
The provisions relating to the identification of all property and services provided to customers are
relatively straightforward. Property provided to customers may be real or personal, tangible or
intangible, and it is provided during the testing year in one or more transactions representing a sale,
lease, license, loan, exchange, or other consideration. (8) Services are considered to be provided to
customers if during the testing year the services are rendered by the employer to or on behalf of the
customer for consideration. (9) The property and services must be provided to persons acting in the
capacity of http://www.freep.com/section/SPORTS/ customers (other than the employer) in the
ordinary course of business. (10) The provisions of this step can be viewed as a reinforcement of the
definition of "bona fide business reasons" for operating separate lines of business.
B. Assigning Property
and Services to
Lines of Business
After all products and services provided by the employer to customers are identified, the employer
may apportion these products and services among its lines of business in a manner of its discretion.
The regulations allow the employer much freedom of organization and operation in determining its
lines of business, and the employer is not bound in any testing year by the manner in which it
designated its lines of business in any previous year. (11) In addition, the employer is not required to
combine similar business activities in the same designated line, nor is it required to separate
dissimilar products or services. Furthermore, the employer is not forced to segregate products from
services as separate lines. (12) Therefore, the same products and services could be offered by more
than one line of business.
The flexibility of the regulations is quite favorable, since the employer is able to determine its lines
of business in a fashion best suited for the company's future operational structure. For example,
geographical locations may be the best manner for a particular company to delineate its activities.
Employee compensation (including benefits) generally varies among different geographical regions,
and the ability of an employer to separate its lines of business according to location without the
danger of discrimination in its retirement programs will likely enhance an employer's ability to
compete in difference markets. Other grouping distinctions that could be made include wholesale or
retail operations, different transaction types such as sales or leases, and different customer bases
such as governmental or private.
The single restriction placed upon an employer's chosen method of designating its different lines of
business is a test of reasonableness. (13) The regulations provide examples of unreasonableness,
such as an employer's delineating separate lines of business for products and services that are not
offered separately to customers. Similarly, the segregation of business lines would be unreasonable
if the provision of the separate products or services are ancillary or incidental to one another or are
regularly associated with one another. (14)
IV. TEST 2: PROVING "SEPARATENESS" OF
ESTABLISHED LINES OF BUSINESS

4. The second test provides guidance on determining the organizational and operational independence
of individual lines of business from the remainder of the employer's organization. Four specific
criteria for determining this independence are developed in the regulations.
A. Rule 1 - Separate
Organizational Unit
Each line of business must prove its formal organizational individuality (i.e., separate organizational
unit or group of separate organizational units) within the employer. (15) This objective could be
accomplished by the line's legal form, such as a corporation or a partnership that is still controlled
by the employer. The same objective could be accomplished with a non-legal distinction between the
lines of business, such as separate divisions of the employer. Regardless of the manner in which it is
satisfied, the requirement of an absolute separate organization must be met during every day of the
testing year. (16)
B. Rule 2 - Separate Financial Accountability
The separateness of a line of business is also manifested by those lines of business that operate as
individual profit centers (i.e., separate profit center or group of separate profit centers). The
individual line must exhibit its separateness by maintaining its own accounting records reflecting its
profitability for the employer's internal purposes such as planning and control. (17) Independent
financial and accounting records provide strong evidence of the separateness of a line of business
from the remainder of the employer's operations. The regulations thus mandate that separate
accounting records be maintained for each line within an employer for every day of the testing year.
(18)
C. Rule 3 - Separate Employee Workforce
The third rule is one of the few provisions of the section 414(r) regulations that quantifies its
requirements, thereby giving employers more concrete and objective guidance than those provisions
allowing the employer to utilize its own subjective judgment. This rule mandates that a SLOB have
its own employee workforce, which is accomplished only if a minimum of 90 percent of its employees
provide substantial services to that particular line of business. (19)
The regulations narrow the application of the third separateness criteria by requiring a
determination of the percentage of the employee workforce that provides services exclusively to one
particular line of business. This is determined by a fraction, the numerator of which is the number of
employees providing substantial services to that line and the denominator of which is the number of
all employees providing any services to that line. (20) An employee is deemed to be providing
substantial services to one particular line of business if at least 75 percent of his services are
devoted specifically to that line. (21)
For purposes of determining the employees to be included in the fraction for compliance with the
90-percent workforce criteria, all employees who are employed on the first testing day are
considered. (22) Treas. Reg. [section] 1.414(r)-11(b)(7) defines the "first testing day as the earliest
day in the testing year on which any plan of the employer is required to satisfy section 410(b). An
exception to the all-employee rule for determining the workforce is the exclusion of certain
nonresident aliens. (23) Furthermore, when evaluating the services provided by a particular
employee, only those efforts performed to provide property or services to customers of the employer
during the testing year are applicable. (24) The following example of the application of the rules for

5. separateness of the workforce of a SLOB is provided in Treas. Reg. [section] 1.414(r)-3(c)(vi).
Example. Employer A operates three lines of business as determined under Treas. Reg. [section]
1.414(r)-2. One of Employer A's lines of business manufactures and sells tires and other automotive
products. Employee M is a tire press operator in Employer A's tire factory. Employee N is the
manager of the tire factory. Under these facts, the services of Employees M and N contribute to
providing tires to customers of Employer A. Both employees therefore provide services to Employer
A's tire and automotive products line of business within the meaning of Treas. Reg. [section]
1.414(r)-3(c)(5).
D. Rule 4 - Separate Management
Like Rule 3, this provision relates to the composition of the employees of the individual lines of
business, but it refers specifically to the management of the business line. A line of business is
deemed to have its own separate management if at least 80 percent of the top-paid employees
provide their services exclusively to that line. (25)
Again, the regulations provide specific guidance on the calculation of the percentage of separate
management. The percentage represents the number of top-raid employees who devote substantial
services to the line of business in relation to all top-paid employees who provide any services to the
line of business. (26) Top-paid employees are defined as those who are among the highest 10
percent of all employees providing services to the employer ranked by compensation paid by the
employer. (27) An example of the application of the separate management criteria follows.
Example. Employer C operates three lines of business as determined under Treas. Reg. [section]
1.414(r)-2. One of its lines of business is the operation of a chain of athletic equipment and apparel
stores. Of Employer C's total workforce, 10,500 employees provide more than a negligible amount of
the services they provide to Employer C to the athletic equipment and apparel stores lines of
business, and 10,000 of these employees provide at least 25 percent of their services to the athletic
equipment and apparel stores lines of business, within the meaning of Treas. Reg. [section] 1.414(r)-
3(c)(5). Of the 1,000 employees who constitute the top 10 percent by compensation of these 10,000
employees, 930 are substantial-service employees with respect to that line of business. Because 930
is 93 percent of 1,000, at least 80 percent of the top-paid employees provide their exclusive services
with respect to that line of business. Employer C's athletic equipment and apparel stores line of
business, therefore, has its own separate management and thus satisfies the requirement of Treas.
Reg. [section] 1.414(r)-3(b)(5).
Thus, if a specific line of business employs 50 people, the top-paid employees to be examined in the
separate management test would be the five employees (50 X 10% = 5) who are the highest
compensated in the line of business. To pass the 80-percent test, four of five top-paid employees (5 X
80% = 4) must provide services exclusively to that line of business.
One purpose of the 80-percent test is very clear: to prevent abuse in the compensation of top-paid
employees. The separateness and independence of a line of business may be questionable if a large
percentage of its top-paid employees were also providing substantial services to another liner of
business within the employer. Depending on the nature of the line of business, these top-paid
employees may not be providing services commensurate with the compensation they receive from
the line of business.
Despite the clear intent of this rule, it may not prove what it was established to prove. The
underlying purpose of the separate management requirement is to establish the independence of the

6. line of business in its operation, including its decision-making processes and other managerial
functions. This premise, however, is not necessarily proven based on a mathematical calculation of
80 percent of the top-paid employees, since it presumes that the top-paid employees are
management. Obviously, this is not always the case in some industries -- particularly in those
businesses that compensate employees on a commission basis. The separate management
requirement should also involve analysis of the actual duties of the top-paid employees to determine
which employees are actually managerial personnel.
V. TEST 3: STATUTORY REQUIREMENTS
The third major test of a line of business to be deemed a qualified SLOB consists of three statutory
requirements. An employer must satisfy these criteria: (1) a 50-employee requirement, (2) a notice
requirement, and (3) an administrative scrutiny requirement. (28)
A. Fifty-Employee Requirement
The first statutory requirement is very simple. A SLOB must employ a minimum of 50 persons who
devote their services exclusively to the line of business on each day of the testing year. (29) All
employees, including collectively bargained employees, are taken into account for this requirement
with the exception of certain short-term, seasonal, and part-time employees. (30) This requirement
alone will hinder many employers from obtaining status as operating qualified SLOBs, since their
employee populations will not meet the 50-person threshold. Similarly, employers making the best
use of their employees and other resources across several lines of business to avoid duplication of
efforts will be penalized.
B. Notice Requirement
The notice requirement is satisfied for a SLOB if the employer, in a timely manner as determined by
the regulations, notifies the Secretary of the Treasury that it considers itself as operating qualified
separate lines of business for that testing year. (31) No specific instruction, however, is provided on
the manner in which to provide this notice to the IRS. Moreover, Notice 90-57, 1990-2 C.B. 344,
provides that no notice is required until such specific guidance is provided. (32)
The regulations under section 414(r) do, however, state the probable requirements of the notice. The
notice must specify each line of business operated by the employer as well as the Code sections that
are to be applied separately with regard to the employees of each SLOB. (33) Once this notice has
been given, the emplyer is considered to have made this election irrevocably for all plan years that
begin in the testing year. (34)
C. Administrative Scrutiny
The third statutory rule is more complex than the first two. It involves compliance with an
administrative scrutiny requirement of either the statutory safe-harbor test or one of five
administrative safe harbors. In the event an employer is unable to meet any of these administrative
scrutiny tests, individual determinations may be sought from the IRS.
1. Statutory Safe-Harbor Test. The statutory safe-harbor test is satisfied for SLOB only if the ratio of
the percentage of highly compensated employees (HCEs) of the SLOB to the percentage of HCEs to
employees employer-wide is: [35]
(a) at least 50 percent, and

7. (b) no more than 200 percent.
A "ten-percent" exception to the above rule eixsts. Hence, the rquirement of a 50-percent iminum is
considered satisfied if at least 10 percent of all HCEs of the employer provide services exclusively to
the SLOB under the criteria of exclusiveness discussed previously. [36]
Another exception exists in the case of a SLOB that satisfied this statutory safe-harbor test in the
testing year immediately preceding the current testing year. This satisfies the statutory safe-harbor
test for the current testing year, but only if the employer designates the same line of business in the
immediately preceding testing year as in the current testing year, and either. [37]
(1) the HCE percentage ratio of the SLOB does not deviate more than 10 percent between the
current testing year and the immediately preceding testing year, or
(2) at least 95 percent of the employees of the SLOB in the current testing year were employees of
the SLOB in the immediately preceding testing year.
2. Alternate Safe Harbor I -- SLOBs in Different Industries. To satisfy this safe harbor, the separate
line of business must simply operate within a different industry or industries from those of the
employer's other lines of business. [38] This is accomplished only if both of the following stipulations
are met:
(1) the property or services provided to customers by the SLOB falls within one or more of the
industry classifications established by the IRS, [39] and
(2) none of the property or services provided to customers by any other line of business of the
employer falls within the same category or categories. [40]
Treas. Reg. [section] 1.414(r)-5(c)(3) states that the Commissioner will provide, through the issuance
of a revenue procedure or other means, industry categories by which employers may determine the
classification of their separate lines of business. Concurrently with the issuance of the final
regulations, Rev. Proc. 91-64, 1991-50 I.R.B. (Dec. 16, 1991), provides a listing of industry
categories derived from the Standard Industrial Classification codes (the "SIC" codes) in the
Standard Industrial Classification Manual (1987). These codes are expected to be modified based on
the experience of taxpayers and the IRS to reflect better the varying environments or diverse
industries. An employer may disregard foreign operations in determining whether a separate line of
business is in a different industry (or industries) from every other separate line of business of the
employer. [41]
3. Alternate Safe Harbor II -- Segments under FAS 14. An employer will meet the requirements of
this safe harbor if during its testing year it is required under Statement of Financial Accounting
Standards Number 14 (FAS 14) to report the operations of its line of business as a separate segment
or segments to the Securities and Exchange Commission in an annual report (either Form 10-K (42)
or Form 20-F (43)). The SLOB must provide property and serivces to customers of the employer that
are identical to the property and services provided to customers by the industry segment(s)
reportable under FAS 14. (44) Furthermore, the Form 10-K or Form 20-F must be timely filed with
the SEC (90 days or six months, respectively, after the close of the employer's fiscal year which
includes as 15-day extension of filing time). (45)
4. Alternate Safe Harbor III -- Merger and Acquisition Safe Harbor. For a four-year period beginning
with the first testing year,(46) a separate line of business acquired through certain mergers and

8. acquisitions will generally meet a safe harbor if:
(1) the employer designates the acquired business as a line of business,
(2) the line of business is a separate line of business, and
(3) there are no significant changes in the workforce of the acquired separate line of business. (47)
5. Alternate Safe Harbor IV -- Average Benefits. If the HCE percentage ratio for a separate line of
business is less than 50 percent, this safe harbor is met if the actual benefit percentage of the
nonhighly compensated employees of the separage line of business is at least equal to the actual
benefit percentage of all the employer's other nonhighly compensated employees. (48) Alternatively,
if the HCE ratio for a line of business is greater than 200 percent, this safe harbor is met if the
actual benefits percentage of the HCEs of the separate line of business does not exceed the actual
benefits percentage of all the employer's other HCEs. (49)
6. Alternate Safe Harbor V -- Minimum or Maximum Benefits. This safe harbor provision measures
minimum benefits provided to nonhighly compensated employees and maximum benefits provided to
HCEs, whichever is applicable. The tests applied are determined by use of the ratio of the
percentage of HCEs in the separate line of business to the percentage of HCEs employer-wide.
a. Minimum Benefit Required. The minimum benefit rules of this safe harbor are applied to SLOBs
that have a HCE percentage ratio of less than 50 percent for the testing year. (50) In this case, the
safe harbor will be satisfied if both of the following conditions are met. (51)
(1) at least 80 percent of the nonhighly compensated employees of the SLOB benefit under the
defined plan of the employer, and
(2) those nonhighly compensated employees benefiting under the plan receive at least the specified
minimum benefits.
For defined benefit plans, this specified minimum benefit results from calculating the accrued
benefit of a single life annuity at an accrual rate of .75 percent of the employee's compensation for a
cnsecutive five-year period during which the compensation is highest in aggregate with a normal
retirement age of 65. (52) For defined contribution plans, the specified minimum benefit is
calculated at an allocation rate of at least 3 percent of the employee's compensation for the year.
(53)
Alternatively, the minimum benefit standard can be satisfied on the basis of the average benefit
accruals or allocations provided to nonhighly compensated employees in a separate line of business.
In contrast to the 80-percent requirement in the general rule, the averaging is based on 100 percent
of the nonhighly compensated employees in the SLOB. Also, to use the average approach, the
employer must still provide the minimum benefit to at least 60 percent of the individual nonhighly
compensated employees in the SLOB. (54)
b. Maximum Benefit Allowed. The maximum benefit rules pertain to SLOBs that have a HCE
percentage ration or more than 200 percent for the testing year. (55) Each HCE benefiting under
the SLOB's plan may receive no more than the specified maximum benefit.
In the case of a defined benefit plan, the maximum benefit is determined by calculating the accrued
benefit of a single life annuity at a rate equal to 2.5 percent of the employee's compensation. (56) In

9. the case of a defined contribution plan, the maximum benefit allowed is a contribution of no more
than 10 percent of the employee's compensation for the year. (57)
An employer may satisfy the safe harbor with both a defined benefit plan and a defined contribution
plan. The combined minimum benefit provided to nonhighly compensated employees from both plan
must equal at least 100 percent of the specified minimum benefit required. (58) For example, if a
nonhighly compensated employee receives accrued benefits from a defined benefit plan at an
aggregate accrual rate of .375 percent of the employee's compensation for a consecutive five-year
period (50 percent of the defined benefit minimum detailed above), the employee must receive an
allocation under the defined contribution plan of at least 1.5 percent of the employee's compensation
for the year (50) percent of the defined benefit minimum detailed above), the employee must receive
an allocation under the defined contribution plan of at least 1.5 percent of the employee's
compensation for the year (50 percent of the defined contribution minimum detailed above). Again,
the combined percentages of benefits provided to the nonhighly compensated employee must be at
least 100 percent of the specified minimum benefit required.
Similarly, the combined maximum benefit provided to HCEs from both plans must not exceed 100
percent of the specified maximum benefit allowed, as previously defined. (59) For example, if a HCE
reveives accrued benefits from a defined benefit plan at an accrual rate of 1.25 percent of the
employee's compensation (50 percent of the defined benefit maximum detailed above), the
employee's benefits received under the defined contribution plan cannot exceed 5 percent of the
employee's compensation for the year (50 percent of the defined contribution maximum detailed
above). Therefore, combined benefits provided from the two plans will not exceed 100 percent of the
specified maximum benefit allowed to HCEs.
7. Individual Determination of Administrative Scrutiny. If a SLOB fails to satisfy any of the safe
harbors provided by the regulations, an employer may still meet the administrative scritiny
requirements by requesting and receiving an individual determination from the Commissioner. (60)
An employer is permitted to petition for such a determination only by following the procedures
established by the Commissioner. (61) Additionally, the SLOB must have been able to satisfy one of
six alternative requirements. (62)
According to Treas. Reg. [section] 1.414(r)-6(c), several factors are reviewed by the Commissioner
issue an individual determination of satisfaction of administrative scrutiny by a SLOB. These include
separateness of property and services provided to customers by the SLOB in relation to all property
and services provided search engines to customers emplyer-wide; separateness of the SLOB's
organization and operation; the nature of competition faced by the SLOB in the industry in in which
it conducts business; historical and geographical factors; the degree to which the SLOB fails to
conform with any of the safe harbor requirements; and any other factors the Commissioner deems to
be relevant in granting an individual determination of administrative scrutiny.
8. Rationales underlying Administrative Scrutiny. Certain premises underlie each of the safe harbors
as well as the availability of an individual determination of administrative scrutiny. First, the
statutory safe harbor -- which evaluates the percentage of HCEs of a separage line of business in
relation to the percentage of HCEs employer wide -- is based on the assumption that if a SLOB does
not contain an unusually high level of HCEs in relation to other lines of business of the employer, the
benefits provided to the employees of this SLOB are less likely to discriminate against nonhighly
compensated employees or in favor of HCEs. This assumption is clearly arguable and may be too
simplistic.
Second, the industry category safe harbor supposes that if a SLOB can be placed in a category

10. sufficiently dissimilar to other lines of business of the employer, then no examination of benefits
provided in a particular SLOB is necessary. This separateness of the nature of the operations of a
particular line of business as compared to operations employer-wide is sufficient to qualify it as a
separate business, thus precluding the possibility of benefit discrimination under qualified
retirement plan regulations.
Third, the premise of the FAS 14 safe harbor is similar to that of the industry category safe harbor.
Basically, the IRS contends that separation of an employer's lines of business owing to the
requirements of another regulatory agency (i.e., the SEC) is sufficient evidence with which to
separate the lines of business for purposes of measuring discrimination of benefits provided to
employees of those lines http://delightfulartis10.jimdo.com/2015/05/16/60-minutes-sports-cbs-news/
of business.
Fourth, the minimum or maximum benefits safe harbor is designed under a premise much like that
of the statutory safe harbor. Generally, this safe harbor attempts to evaluate the benefits provided to
each employee of a SLOB to ensure that HCEs are not receiving benefits to the detriment of
nonhighly compensated employees within that specific line of business of an employer.
Fifth, the merger and acquisition safe harbor provides a safety valve for SLOBs that are acquired
through certain mergers and acquisitions -- a common occurrence in the U.S. economy. Mergers and
acquisitions must be entitled to the transition relief under section 410(b)(6)(C).
Sixth, the average benefits safe harbor provides a standard that takes into account the relative level
of benefits of one line compared to the level of benefits in other lines. The addition of this safe
harbor in the final regulations attempts to add flexibility to the minimum or maximum benefits safe
harbor, which provides an absolute standard.
Finally, the process of individual determination by the IRS of the qualification of a line of business as
separate acknowledges the fact that some lines of business of individual employers are truly
separate lines of business in substance but could not qualify as such under the Treas. Reg. [section]
1.414(r). This process allows consideration of additional specific facts relevant to the operations of a
line of business as a separate entity that are not evaluated in the regulations.
VI. CONCLUSION
The regulations under section 414(r) provides significant guidance on determining an employer's
organzation as separate lines of business for purposes of testing nondiscrimination of benefits
provided under qualified retirement plans. Although the treatment of an employer's sturcture as
containing qualified SLOBs is not mandatory, if will provide relief to many employers, particularly
those that are large and operate several diverse lines of business with several variations of benefits
provided to employees employer-wide. Employers desiring to fall under the SLOB rules should
structure their operations in a manner conducive to establishing the independence and self-
sufficiency of each line of business, as well as reflecting bona fide business reasons for each SLOB's
existence.
Notes
(1) I.R.C. [section] 414(r)(1).
(2) Treas. Reg. 1.414(r)-1(b)(1).

11. (3) Treas. Reg. [section] 1.414(r)-0.
(4) Treas. Reg. [section] 1.414(r)-1(d)(9).
(5) Id.
(6) Treas. Reg. [section] 1.414(r)-2(b)(1).
(7) Treas. Reg. [section] 1.414(r)-11(b)(5).
(8) Treas. Reg. [section] 1.414(r)-2(b)(2).
(9) Id.
(10) Id.
(11) Treas. Reg. [section] 1.414(r)-2(b)(3).
(12) Treas. Reg. [sections] 1.414(r)-2(b)(3)(ii) and (iii).
(13) Treas. Reg. [section] 1.414(r)-2(b)(3)(iii).
(14) Id.
(15) Treas. Reg. [section] 1.414(r)-3(b)(2).
(16) Id.
(17) Id.
(18) Treas. Reg. [section] 1.414(r)-3(b)(3).
(19) Treas. Reg. [section] 1.414(r)-3(b)(4).
(20) Treas. Reg. [section] 1.414(r)-3(c)(2).
(21) Treas. Reg. [section] 1.414(r)-11(b)(5).
(22) Treas. Reg. [section] 1.414(r)-3(c)(4).
(23) Treas Reg. [section] 1.414(r)-3(c)(4)(ii).
(24) Treas. Reg. [section] 1.414(r)-3(c)(5)(ii).
(25) Treas. Reg. [section] 1.414(r)-3(b)(5).
(26) Treas. Reg. [section] 1.414(r)-3(c)(3)(i).
(27) Treas. Reg. [section] 1.414(r)-11(b)(3).
(28) Treas. Reg. [section] 1.414(r)-1(b)(2)(iv).

12. (29) Treas. Reg. [section] 1.414(r)-4(b).
(30) Treas. Reg. [section] 1.414(g)-2T, Q A 9(g).
(31) Treas. Reg. [section] 1.414(r)-4(c)(1).
(32) Further guidance is anticipated to be issued in the near future. The notice is expected to be
incorporated in Form 5300 or revised Form 5310.
(33) Treas. Reg. [section] 1.414(r)-4(c)(1).
(34) Treas. Reg. [section] 1.414(r)-4(c)(2).
(35) Treas. Reg. [sections] 1.414(r)-5(b)(1), 1.414(r)-5(b)(2).
(36) Treas. Reg. [section] 1.414(r)-5(b)(4).
(37) Treas. Reg. [section] 1.414(r)-5(b)(5).
(38) Treas. Reg. [section] 1.414(r)-5(c)(1).
(39) Treas. Reg. [section] 1.414(r)-5(c)(1)(i).
(40) Treas. Reg. [section] 1.414(r)-5(c)(1)(ii).
(41) Treas. Reg. [section] 1.414(r)-5(c)(2).
(42) Treas. Reg. [section] 1.414(r)-5(e)(1)(i).
(43) Treas. Reg. [section] 1.414(r)-5(e)(1)(ii).
(44) Treas. Reg. [section] 1.414(r)-5(e)(2)(ii).
(45) Treas. Reg. [section] 1.414(r)-5(e)(3).
(46) Treas. Reg. [section] 1.414(r)-5(d)(3).
(47) Treas. Reg. [section] 1.414(r)-5(d)(1).
(48) Treas. Reg. [section] 1.414(r)-5(f)(2).
(49) Treas. Reg. [section] 1.414(r)-5(f)(3).
(50) Treas. Reg. [section] 1.414(r)-5(g)(2)(i).
(51) Treas. Reg. [section] 1.414(r)-5(g)(2)(ii).
(52) Treas. Reg. [section] 1.414(r)-5(g)(2)(iii).
(53) Treas. Reg. [section] 1.414(r)-5(g)(2)(iv).

13. (54) Treas. Reg. [section] 1.414(r)-5(g)(2)(iv).
(55) Treas. Reg. [section] 1.414(r)-5(g)(3)(i).
(56). Treas. Reg. [section] 1.414(r)-5(g)(3)(iii).
(57) Treas. Reg. [section] 1.414(r)-5(g)(3)(iv).
(58) Treas. Reg. [section] 1.414(r)-5(g)(4)(ii).
(59) Id.
(60) Treas. Reg. [section] 1.414(r)-6(a).
(61) Treas. Reg. [section] 1.414(r)-6(b)(1).
(62) Treas. Reg. [section] 1.414)r)-6(b)(2).
RAY A. KNIGHT is a professor of accounting at Middle Tennessee State University. He received a
B.S. degree in accounting from the University of Houston, an M.A. degree in accounting from the
University of Alabama, and a J.D. degree from Wake Forest University. He is a member of the
American Institute of Certified Public Accountants, American Bar Association, American Taxation
Association, and several other professional organizations. Mr. Knight has published articles in many
professional journals, including The Tax Executive.
LEE G. KNIGHT is a professor of accounting at Middle Tennessee State University. She received a
B.S. degree in accounting from Western Kentucky Universith, and M.A. and Ph.D. degrees from the
University of Alabama. She is a member of the American Accounting Association and the American
Taxation Association. Ms. Knight has published articles in may professional journals, including The
Tax Executive.
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