IRS written determination 201427023

Private letter rulings and published taxpayer determination letters. Native document type is retained separately; a determination letter is not labeled a private letter ruling. These taxpayer-specific releases cannot be used or cited as precedent under 26 USC 6110(k)(3); applicability and current legal force are not independently certified. Keep repeated UILC subjects attached to one actual numbered document.

INTERNAL

TREASUTY
EVEN
SERVICE

REVENUE

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

APR - 8 2014

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Uniform Issue List: 401.06-01

T:EP: RATZ

Legend:

Company

=

Plan

=

Dear ****************

This is in response to your letter dated December 20, 2012, in which you request a
ruling that the minimum distribution requirements of section 401(a)(9) of the Internal
Revenue Code ("Code") would not be violated if the Company amended the Plan to
offer a lump sum payment option, during a limited window period, to the Plan's
participants, beneficiaries, and alternate payees for whom annuity payments have
already begun.

The following facts and representations have been submitted under penalty of perjury in
support of the ruling requested:

FACTS

Company is in the entertainment industry and has operations in the United States and
other countries. It sponsors the Plan, which is intended to be a tax-qualified defined
benefit plan. The Plan is in receipt of a favorable determination letter and currently has

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an on-cycle determination letter request for the Plan pending. The ruling requested in
your December 20, 2012, letter is not part of that determination letter request. The Plan
has been amended to freeze benefit accruals as of December 31, 2012.

The normal form of benefit for a single participant in the Plan is a single life annuity, and
the normal form of benefit for a married participant is a 50% joint and survivor annuity.
Optional forms of benefit in the Plan include 75% and 100% joint and survivor annuities,
Social Security leveling options, life and period certain annuities, and lump sum. The
optional forms of benefit available to a particular participant depend on the terms of the
Plan.

The Company proposes to amend the Plan to offer, during a limited period of time, a
lump sum payment option to certain participants, beneficiaries, and alternate payees of
the Plan who are in pay status (the "Covered Individuals").1 Under the amendment, the
Covered Individuals would have a specified limited window period of no less than 60
days and no more than 90 days (the "Window") during which they could elect to receive
the actuarial present value of their remaining benefits under the Plan at the time of such
election in the form of a single lump sum payment. Each Covered Individual receiving
benefit payments would be able to elect to receive, in lieu of his or her current annuity,
the actuarial present value of his or her remaining accrued benefits either in a single life
annuity, qualified joint and survivor annuity (if applicable), qualified optional survivor
annuity (if applicable), or an immediate lump sum payment.

Elections by Covered Individuals to receive a new distribution option will be subject to
applicable spousal consent, which will include, to the extent required by law, both the
current spouse, and a former spouse if the Covered Individual has remarried since the
annuity starting date. Covered Individuals that elect a new distribution option will be
considered to have a new annuity starting date as of the first day of the month in which
their new benefit is payable.

Company represents the Plan's AFTAP exceeds 100%, and the Plan's actuary has
confirmed that the lump sum window program will not trigger benefit restrictions
described in section 436 or the Internal Revenue Code, as amended ("Code").
Additionally, the amendment will not change the ability of Covered Individuals to elect
during the Window to receive qualified joint and survivor annuities in accordance with
sections 401(a)(11) and 417 of the Code.

Based solely on the facts and representations stated above, Company requests a ruling
that the minimum distribution requirements of section 401(a)(9) of the Code would not
be violated if the Company amended the Plan to offer a lump sum payment option,
during a limited window period of no less than 60 days and no more than 90 days, to the

Under the proposed amendment, it is possible that terminated participants, beneficiaries, and alternate
payees with a vested benefit who have not commenced payment will be able to participate in the Window
program and elect a lump sum payment, but the ruling request addresses only those Covered Individuals
who have begun receiving payments.

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Plan's participants, beneficiaries, and alternate payees for whom annuity payments
have already begun.

APPLICABLE LAW

Section 401(a)(9) of the Code and the regulations thereunder ("Regulations") provide
rules relating to required minimum distributions from qualified plans. Section 401(a)(9)
of the Code was enacted to ensure that the amounts contributed to qualified retirement
plans were used for retirement by requiring that retirement payments begin no later than
a certain date, with no less than a certain amount being distributed each year of
retirement. The legislative history of the original version of section 401(a)(9) of the
Code in 1962 stated that its purpose is in "preventing lifetime accumulations which
might escape income taxation altogether." 108 Cong. Rec. 18755, 18756 (1962)
(statement of Sen. Smathers).

In general, section 401(a)(9)(A) of the Code states that a trust shall not constitute a
qualified trust under this subsection unless the plan provides that the entire interest of
each employee -

(i) will be distributed to such employee not later than the required beginning date,
or

(ii) will be distributed, beginning not later than the required beginning date, in
accordance with regulations, over the life of such employee or over the lives of
such employee and a designated beneficiary (or over a period not extending
beyond the life expectancy of such employee or the life expectancy of such
employee and a designated beneficiary).

Section 401(a)(11) of the Code generally provides that a defined benefit plan will not be
considered a qualified plan unless vested benefits, with respect to a married participant
who dies before the annuity starting date, are payable in the form of a qualified
preretirement survivor annuity and, with respect to a married participant who dies after
the annuity starting date, a qualified joint and survivor annuity.

Section 415(a)(1)(A) of the Code provides that a trust which is a part of a pension plan
will not constitute a qualified trust if the pension plan provides for the payment of
benefits which exceed the limitation of section 415(b). Section 415(b)(2)(B) of the Code
generally provides that if the benefit under a defined benefit plan is payable in any form
other than a straight life annuity, the determination as to whether the section 415(b) limit
has been satisfied shall be made by adjusting the benefit so that it is equivalent to a
straight life annuity.

Section 417(a) of the Code provides that a plan meets the requirements of section
401(a)(11) if, among other requirements, each participant may elect during the
applicable election period to waive the qualified joint and survivor annuity form of benefit

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or the qualified preretirement survivor annuity form of benefit (or both). Section
417(a)(6) of the Code defines the applicable election period as meaning, in part, in the
case of an election to waive the qualified joint and survivor annuity form of benefit, the
180-day period ending on the annuity starting date.

Treas. Reg. § 1.401(a)(9)-6, Q&A-1(a), in pertinent part, states that in order to satisfy
section 401(a)(9) of the Code, distributions of the employee's entire interest under a
defined benefit pension plan must be paid in the form of periodic annuity payments for
the employee's life (or the joint lives of the employee and beneficiary) or over a period
certain that does not exceed the maximum length of the period certain determined in
accordance with A-3 of this section. Once payments have commenced over a period,
the period may only be changed in accordance with A-13 or A-14 of this section.
Except as otherwise provided in this section (such as permitted increases described in
A-14 of this section), all payments (whether paid over an employee's life, joint lives, or a
period certain) also must be nonincreasing.

Treas. Reg. § 1.401(a)(9)-6, Q&A-13(a) states that an annuity payment period may be
changed in accordance with the provisions set forth in paragraph (b) of this A-13 or in
association with an annuity payment increase described in A-14 of this section.

Treas. Reg. § 1.401(a)(9)-6, Q&A-14(a) states that except as otherwise provided in this
section, all annuity payments (whether paid over an employee's life, joint lives, or a
period certain) must be non-increasing or increase only in accordance with one or more
of the following -

(1) With an annual percentage increase that does not exceed the percentage
increase in an eligible cost-of-living index as defined in paragraph (b) of this A-14
for a 12-month period ending in the year during which the increase occurs or the
prior year;

(2) With a percentage increase that occurs at specified times (e.g., at specified
ages) and does not exceed the cumulative total of annual percentage increases
in an eligible cost-of-living index as defined in paragraph (b) of this A-14 since
the annuity starting date, or if later, the date of the most recent percentage
increase. However, in cases providing such a cumulative increase, an actuarial
increase may not be provided to reflect the fact that increases were not provided
in the interim years;

(3) To the extent of the reduction in the amount of the employee's payments to
provide for a survivor benefit, but only if there is no longer a survivor benefit
because the beneficiary whose life was being used to determine the period
described in section 401(a)(9)(A)(ii) over which payments were being made dies
or is no longer the employee's beneficiary pursuant to a qualified domestic
relations order within the meaning of section 414(p);

(4) To pay increased benefits that result from a plan amendment;

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(5) To allow a beneficiary to convert the survivor portion of a joint and survivor
annuity into a single sum distribution upon the employee's death; or

(6) To the extent increases are permitted in accordance with paragraph (c) or (d)
of this A-14.

Treas. Reg. § 1.415(b)-(1)(b)(1)(iii) provides that if a participant will have distributions
commencing at more than one annuity starting date, the limitations of section 415 of the
Code must be satisfied as of each of the annuity starting dates, taking into account the
benefits that have been provided at all of the annuity starting dates.

# ANALYSIS

Section 401(a) of the Code provides a tax deferral for retirement benefits accumulated
in a qualified pension plan. Section 401(a)(9) of the Code and the Regulations ensure
that these tax-deferred accumulations are, in fact, used during retirement and do not
escape taxation.

Treas. Reg. § 1.401(a)(9)-6 sets forth the rules governing required distributions from
defined benefit plans and annuity contracts. Treas. Reg. § 1.401(a)(9)-6, Q&A-13(a)
states that an annuity payment period may be changed in association with an annuity
payment increase described in A-14 of this section. Treas. Reg. § 1.401(a)(9)-6, Q&A-
14(a)(4) provides that annuity payments from a qualified plan may increase if the
payment of increased benefits results from a plan amendment.

The Company's proposed amendment to the Plan would add a lump sum option for the
Covered Individuals under which they will have the opportunity to elect within a window
period of no less than 60 days, and no more than 90 days, to receive, in lieu of their
current annuities, either an available annuity form of benefit (including a single life
annuity, qualified joint and survivor annuity (for married participants)) or a lump sum
payment. Elections by Covered Individuals to receive a new distribution option will be
subject to applicable spousal consent.2

The proposed amendment will result in a change in the annuity payment period. The
annuity payment period will be changed in association with the payment of increased
benefits as a result of the addition of the lump sum option. In addition, Covered
Individuals who wish to change their distribution option will be considered to have a new
annuity starting date as of the first date of the month in which the new benefit is
payable. Because the ability to select a lump sum option will only be available during a
limited window, the increased benefit payments will result from the proposed plan
amendment and, as such, is a permitted benefit increase under Treas. Reg. §
1.401(a)(9)-6, Q&A-14(a)(4).

2 Spousal consent must include, where the law requires, both the current spouse and a former spouse, if
the annuitant has remarried.

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In order for a plan to remain qualified under section 401(a) of the Code, the calculation
of the value of the benefit elected under the lump sum window option must comply with
the requirements of section 417(e) and the regulations thereunder. Under section 6.03
of Revenue Procedure 2014-4, subject to certain exceptions, the IRS generally does not
issue letter rulings on matters involving qualification issues under section 401 through
420 of the Code. Qualification matters are generally handled by the Employee Plans
Determination letter program as provided in Revenue Procedure 2014-6. Accordingly,
we have not considered, among other matters, whether the lump sum window benefits
comply with the requirements of section 417(e) and the regulations thereunder with
respect to the amount of the distribution and minimum present value requirement that is
applied based on the present value of the normal retirement benefit. Instead, this letter
ruling is based on your representation that the lump sum window option satisfies section
417(e) of the Code and section 1.417(e)-1 of the regulations.

## RULING

Therefore, in this circumstance, that the minimum distribution requirements of section
401(a)(9) of the Code would not be violated if the Company amended the Plan to offer a
lump sum window option, during a limited window period of no less than 60 days and no
more than 90 days, to the Plan's participants, beneficiaries, and alternate payees for
whom annuity payments have already begun.

Except as specifically ruled above, no opinion is expressed as to the federal tax
consequences of the transaction described above under any other provision of the
Code, including sections 401(a)(4), 411, 415, 417 and 436 or of Title I of ERISA. In
addition, no opinion is expressed regarding the qualification of the Plan.

In addition, no opinion is expressed on whether the method for valuing benefits under
the limited window period option satisfies the requirements of section 417(e) and the
regulations thereunder.

This letter is directed only to the taxpayer who requested it. Section 6110(k)(3) of the
Code provides that it may not be used or cited as precedent.

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201427023

If you wish to inquire about this ruling, please contact ************** at ( **** ) \*\*\*\*_\*\*\*\**
Please address all correspondence to SE:T:EP:RA:T2.

Sincerely,
Avier D. 2265

William B. Hulteng, Manager,
Employee Plans Technical Group

Enclosures:
Deleted copy of ruling letter
Notice of Intention to Disclose

CC: