n-02-46.pdf

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing.

This collection currently includes the publisher’s available advance-release directory. Historical bulletin renditions are discovered separately; an advance-release record alone does not certify the collection archive complete.

Part III --- Administrative, Procedural and Miscellaneous
Request for Comments Containing Suggestions for Future Proposed Regulations
Concerning Permitted Elimination of Optional Forms of Benefit from Defined
Benefit Plans
Notice 2002-46
The Internal Revenue Service and the Treasury Department request comments
on regulations that are expected to be proposed under § 411(d)(6) of the Internal
Revenue Code concerning the elimination of optional forms of benefit from defined
benefit plans, including the types of situations in which the retention of particular
optional forms of benefit under a defined benefit plan results in significant burdens and
complexities for sponsors of retirement plans and for participants and the conditions
under which these optional forms of benefit are of de minimis value to participants.
BACKGROUND
Section 411(d)(6) generally provides that a plan is treated as not satisfying the
requirements of § 411 if the accrued benefit of a participant is decreased by a plan
amendment.
1
Under § 411(d)(6)(B), a plan amendment that eliminates or reduces an
early retirement benefit, a retirement-type subsidy, or an optional form of benefit is
treated as reducing accrued benefits to the extent that the amendment applies to
benefits accrued as of the later of the adoption date or the effective date of the
amendment. However, § 411(d)(6)(B) permits the Secretary of Treasury to issue
regulations that permit the elimination of optional forms of benefit. Pursuant to this
authority, regulatory exceptions to the application of § 411(d)(6) to optional forms of
benefit have been developed in the past to address certain specific practical problems
and to permit elimination of most optional forms of benefit in many defined contribution
plans. See A-2 and A-10 of §1.411(d)-4 of the Income Tax Regulations.
Prior to the enactment of the Economic Growth and Tax Relief Reconciliation
Act of 2001 (EGTRRA), 115 Stat. 38 (2001), the authority to permit elimination of an
optional form of benefit did not apply if the optional form constituted an early retirement
benefit or retirement-type subsidy. EGTRRA amended § 411(d)(6)(B) to provide for the
Secretary of Treasury to issue regulations under which § 411(d)(6)(B) would not apply
to any plan amendment which reduces or eliminates benefits or subsidies that create
significant burdens or complexities for the plan and plan participants, unless such
amendment adversely affects the rights of any participant in a more than de minimis

1
Section 204(g)(2) of the Employee Retirement Income Security Act of 1974 (ERISA),
Public Law 93-406, (88 Stat. 829), provides a parallel rule to § 411(d)(6)(B) of the
Internal Revenue Code that applies under Title I of ERISA, and authorizes the
Secretary of the Treasury to provide exceptions to this parallel ERISA requirement.
Thus, Treasury regulations issued under § 411(d)(6)(B) of the Internal Revenue Code
apply as well for purposes of § 204(g)(2) of ERISA.

manner. Under section 645(b)(3) of EGTRRA, these regulations are to be issued by
December 31, 2003 and are to apply to plan years beginning after December 31, 2003
or an earlier date.
COMMENTS REQUESTED
The Service and Treasury intend to issue proposed regulations under §
411(d)(6) of the Code with respect to optional forms of benefit under defined benefit
plans. Consequently, comments are requested on which optional forms of benefit
(including early retirement benefits and retirement-type subsidies) should be permitted
to be eliminated and the circumstances under which they should be permitted to be
eliminated, consistent with § 411(d)(6)(B) as amended by EGTRRA. In particular,
comments are requested on when particular optional forms of benefit (whether or not
subsidized) result in significant burdens and complexities for sponsors of retirement
plans and for participants and when these optional forms of benefit are of de minimis
value to a participant. Comments are also requested on which optional forms of benefit
should remain protected. Finally, comments are requested on any other issues relating
to the treatment of optional forms of benefit under defined benefit plans under §
411(d)(6) on which guidance is needed.
The authority to provide exceptions to the restrictions of § 411(d)(6) does not
apply to other requirements of the Internal Revenue Code. Thus, for example, the
upcoming regulations will not permit a defined benefit plan to be amended to eliminate
a distribution form required by §§ 401(a)(11) and 417 and will not affect the
requirements of § 401(a)(31) (relating to direct rollovers).
Comments should be submitted by September 30, 2002, in writing, and should
reference Notice 2002-46.
Comments may be submitted to CC:ITA:RU (Notice 2002-46), room 5226,
Internal Revenue Service, POB 7604 Ben Franklin Station, Washington, DC 20044.
Comments may be hand delivered between the hours of 8 a.m. and 5 p.m., Monday
through Friday to: CC:ITA:RU (Notice 2002-46), Courier's Desk, Internal Revenue
Service, 1111 Constitution Avenue NW., Washington, D.C. Alternatively, comments
may be submitted via the Internet at Notice.Comments@irscounsel.treas.gov. All
comments will be available for public inspection and copying.
DRAFTING INFORMATION
The principal authors of this notice are Linda Marshall of the Office of the
Associate Chief Counsel (Tax Exempt and Government Entities) and Andrew
Zuckerman of the Employee Plans, Tax Exempt and Government Entities Division. For
further information regarding this notice, contact the Employee Plans taxpayer
assistance telephone service between the hours of 8:00 a.m. and 6:30 p.m. Eastern
Time, Monday through Friday by calling 1-877-829-5500 (a toll-free number). Ms.

Marshall can be reached at (202) 622-6030 and Mr. Zuckerman can be reached at
(202) 283-9655 (not toll-free numbers).