<nobr>Jan 24, 2005</nobr>

Treasury Releases Final 411(d)(6) Regulations

The Department of the Treasury has released final regulations modifying the circumstances under which certain forms of distribution previously available are permitted to be eliminated from qualified defined contribution plans. The regulations are effective January 25, 2005. A copy of the regulations is attached.

The regulations were drafted in response to an amendment to Internal Revenue Code section 411(d)(6) included in a H.R. 1102, crafted by Representatives Rob Portman (R-OH) and Ben Cardin (D-MD). The Portman-Cardin legislation partially implemented an earlier ERIC proposal.

Background

Section 411(d)(6)(A) of the Code generally provides that a plan will not be treated as satisfying the requirements of section 411 if the accrued benefit of a participant is decreased by a plan amendment. Prior to amendment by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), section 411(d)(6) provided that an amendment is treated as reducing an accrued benefit if, with respect to benefits accrued before the amendment is adopted, the amendment has the effect of either eliminating or reducing an early retirement benefit or a retirement-type subsidy, or, except as provided by regulations, eliminating an optional form of benefit. Section 645(a)(1) of EGTRRA added section 411(d)(6)(E), which provides that, except to the extent provided in the regulations, a defined contribution plan is not treated as reducing a participant's accrued benefit where a plan amendment eliminates a form of distribution previously available under the plan if a single-sum distribution is available to the participant at the same time as the form of distribution eliminated by the amendment and the single-sum distribution is based on the same or greater portion of the participant's account as the form of distribution eliminated by the amendment.

On July 8, 2003, a notice of proposed rulemaking was published in the Federal Register to reflect the addition of section 411(d)(6)(E) by EGTRRA. The proposed regulations amended §1.411(d)-4, Q&A-2(e) to eliminate the 90-day advance notice condition on plan amendments otherwise permitted under §1.411(d)-4, Q&A-2(e). Following publication of the proposed regulations, comments were received. After consideration of the comments received, the proposed regulations were adopted by Treasury with the revisions noted below.

Revisions to the Proposed Regulations

The final regulations make only two revisions to the July, 2003 proposed regulations. The final regulations:

1.) Clarify that an amendment to eliminate or restrict a participant's right to receive payment of accrued benefits under a particular optimal benefit form can apply only to distributions with annuity starting dates after the amendment is adopted and, therefore, cannot apply to distributions that have already commenced.

2.) Revise the example in §1.411(d)-4, Q&A-2(e) to clarify the effective date of the amendment to eliminate the form of distribution.

Vanessa A. Scott
Legislative Counsel
The ERISA Industry Committee
1400 L Street, NW Suite 350
Washington, DC 20005
Tel: 202.789.1400 Fax 202.789.1120
http://www.eric.org

Text Files:

411(d)(6)Regs

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