64320 Federal Register / Vol. 60, No. 241 / Friday, December 15, 1995 / Rules and Regulations

specified in the alert service bulletin, prior to

further flight, accomplish the actions

specified by either paragraph (e)(2)(i) or

(e)(2)(ii) of this AD.

(i) Adjust the lockout cam until the correct

clearance is obtained, in accordance with the

alert service bulletin. Or

(ii) If the correct clearance cannot be

obtained by adjusting the lockout cam,

replace the lockout cam in accordance with

the alert service bulletin.

(f) An alternative method of compliance or

adjustment of the compliance time that

provides an acceptable level of safety may be

used if approved by the Manager, Seattle

Aircraft Certification Office (ACO), FAA,

Transport Airplane Directorate. Operators

shall submit their requests through an

appropriate FAA Principal Maintenance

Inspector, who may add comments and then

send it to the Manager, Seattle ACO.

Note 2: Information concerning the

existence of approved alternative methods of

compliance with this AD, if any, may be

obtained from the Seattle ACO.

(g) Special flight permits may be issued in

accordance with sections 21.197 and 21.199

of the Federal Aviation Regulations (14 CFR

21.197 and 21.199) to operate the airplane to

a location where the requirements of this AD

can be accomplished.

(h) The actions shall be done in accordance

with Boeing Service Bulletin 757–52–0042,

Revision 1, dated April 26, 1990; and Boeing

Alert Service Bulletin 757–52A0023,

Revision 3, dated November 18, 1993. This

incorporation by reference was approved by

the Director of the Federal Register in

accordance with 5 U.S.C. 552(a) and 1 CFR

part 51. Copies may be obtained from Boeing

Commercial Airplane Group, P.O. Box 3707,

Seattle, Washington 98124–2207. Copies may

be inspected at the FAA, Transport Airplane

Directorate, 1601 Lind Avenue, SW., Renton,

Washington; or at or at the Office of the

Federal Register, 800 North Capitol Street,

NW., suite 700, Washington, DC.

(i) This amendment becomes effective on

January 16, 1996.

Issued in Renton, Washington, on

November 27, 1995.

Darrell M. Pederson,

Acting Manager, Transport Airplane

Directorate, Aircraft Certification Service.

[FR Doc. 95–29302 Filed 12–14–95; 8:45 am]

BILLING CODE 4910–13–U]

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

[TD 8631]

RIN 1545–AT79

Notice of Significant Reduction in the

Rate of Future Benefit Accrual

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Temporary regulations.

SUMMARY: This document contains

temporary regulations that provide

guidance concerning the requirements

of section 204(h) of the Employee

Retirement Income Security Act of 1974,

as amended (ERISA), relating to defined

benefit plans and to individual account

plans that are subject to the funding

standards of section 302 of ERISA. It

requires the plan administrator to give

notice of certain plan amendments to

participants in the plan and certain

other parties. The text of these

temporary regulations also serves as the

text of the proposed regulations set forth

in the notice of proposed rulemaking on

this subject published in the Proposed

Rules section of this issue of the Federal

Register.

EFFECTIVE DATE: December 15, 1995.

FOR FURTHER INFORMATION CONTACT:

Betty J. Clary, (202) 622–6070 (not a tollfree number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

These regulations are being issued

without prior notice and public

procedure pursuant to the

Administrative Procedure Act (5 U.S.C.

553). For this reason, the collection of

information contained in these

regulations has been reviewed and,

pending receipt and evaluation of

public comments, approved by the

Office of Management and Budget under

control number 1545–1477. Responses

to this collection of information are

required under section 204(h) of ERISA

upon the adoption of certain

amendments to pension plans.

An agency may not conduct or

sponsor, and a person is not required to

respond to, a collection of information

unless the collection of information

displays a valid control number.

For further information concerning

this collection of information, and

where to submit comments on the

collection of information and the

accuracy of the estimated burden and

suggestions for reducing this burden,

please refer to the preamble to the crossreferencing notice of proposed

rulemaking published in the Proposed

Rules section of this issue of the Federal

Register.

The regulations do not involve any

issue of confidentiality.

Background

This document contains temporary

regulations that provide guidance on

section 204(h) of the Employee

Retirement Income Security Act of 1974,

as amended (ERISA), 29 U.S.C. 1054(h).

Section 204(h) of ERISA was added by

section 11006(a) of the Single-Employer

Pension Plan Amendments Act of 1986

(Title XI of Public Law 99–272), and

was amended by section 1879(u)(1) of

the Tax Reform Act of 1986, Public Law

99–514. Pursuant to section 101(a) of

the Reorganization Plan No. 4 of 1978,

29 U.S.C. 1001nt, the Secretary of the

Treasury has authority to issue

regulations under parts 2 and 3 of

subtitle B of title I of ERISA (including

section 204 of ERISA). Under section

104 of Reorganization Plan No. 4, the

Secretary of Labor retains enforcement

authority with respect to parts 2 and 3

of subtitle B of title I of ERISA, but, in

exercising such authority, is bound by

the regulations issued by the Secretary

of the Treasury.

Prior guidance relating to the

requirements of section 204(h) has been

provided in Rev. Proc. 89–65 (1989–2

C.B. 786) and Rev. Proc. 94–13 (1994–

1 C.B. 566), and under Notice 87–21

(1987–1 C.B. 458), Notice 88–131 (1988–

2 C.B. 546), Notice 89–92 (1989–2 C.B.

410), and Notice 90–73 (1990–2 C.B.

353). These temporary regulations

provide further guidance, in the form of

Questions and Answers.

The provisions in this Treasury

Decision are needed immediately to

provide guidance to the public with

respect to the notice requirements of

section 204(h) of ERISA. Issues related

to section 204(h) arise in connection

with a broad range of plan amendments,

including amendments prompted by

recent changes in the law. Therefore, it

is found impracticable and contrary to

the public interest to issue this Treasury

decision with prior notice under 5

U.S.C. 553(b).

Explanation of Provisions

Section 204(h) of ERISA applies if a

defined benefit plan or an individual

account plan that is subject to the

funding standards of section 302 of

ERISA is amended to provide for a

significant reduction in the rate of

future benefit accrual. It requires the

plan administrator to give written notice

of the amendment to participants in the

plan, alternate payees, and employee

organizations representing participants

in the plan (or to a person designated,

in writing, to receive the notice on

behalf of a participant, alternate payee,

or employee organization). The notice

must set forth the plan amendment and

its effective date and must be provided

after adoption of the amendment and

not less than 15 days before the effective

date of the amendment.

A plan amendment that is subject to

the notice requirements of section

204(h) of ERISA may also be subject to

additional reporting and disclosure

requirements under title I of ERISA,
Federal Register / Vol. 60, No. 241 / Friday, December 15, 1995 / Rules and Regulations 64321

1This is not intended to affect the rights of

employees under other provisions of ERISA.

such as the requirement to provide a

summary of material modifications. See

sections 102(a) and 104(a) of ERISA, 29

U.S.C. 1022 and 1024, and the

regulations thereunder for guidance on

when a summary of material

modifications must be provided. Section

204(h) notice must be provided at least

15 days in advance of the effective date

of an amendment significantly reducing

the future rate of benefit accrual, even

though a summary of material

modifications describing the

amendment is provided at a later date.

Section 204(h) of ERISA does not

apply to an amendment that does not

affect the rate of future benefit accrual.

These regulations clarify that an

amendment to a defined benefit plan

that does not affect the annual benefit

commencing at normal retirement age

does not affect the rate of future benefit

accrual for purposes of section 204(h).

Accordingly, the regulations provide

that the plan administrator of a defined

benefit plan is not required to provide

section 204(h) notice with respect to an

amendment that does not affect the

future annual benefit payable at normal

retirement age, even if the amendment

affects other forms of payment (such as

a single sum distribution) or benefits

commencing at a date other than normal

retirement age (such as an early

retirement benefit).

The regulations also clarify that an

amendment to an individual account

plan that does not change the amount of

future allocations to participants’

accounts does not affect the rate of

future benefit accrual for purposes of

section 204(h) of ERISA. Accordingly,

section 204(h) notice is not required

with respect to any such amendment.

Even if an amendment affects the rate

of future benefit accrual, section 204(h)

notice is required only if the

amendment significantly reduces the

rate of future benefit accrual. Under the

regulations, whether an amendment

significantly reduces the rate of future

benefit accrual is to be determined

based on reasonable expectations taking

into account all relevant facts and

circumstances.

The regulations delegate to the

Commissioner of Internal Revenue the

authority to provide that section 204(h)

notice need not be provided with

respect to plan amendments that the

Commissioner determines are necessary

or appropriate, as a result of a change

in federal law, to maintain compliance

with the law. The Commissioner may

exercise this authority only through the

publication of revenue rulings, notices,

and other guidance in the Internal

Revenue Bulletin.

In situations in which section 204(h)

notice is required with respect to an

amendment, the regulations provide

guidance on the participants, alternate

payees, and employee organizations to

whom the notice must be provided.

Specifically, the regulations provide

that the plan administrator is not

required to provide notice to a

participant or alternate payee whose

rate of future benefit accrual is

reasonably expected not to be reduced

by the amendment. For example, notice

need not be provided to participants

(such as former employees with a vested

benefit under the plan) who, prior to the

amendment, were not entitled to accrue

future benefits under the plan.

Moreover, under the regulations, section

204(h) notice is not required to be

provided to an employee organization

unless it represents one or more

participants to whom section 204(h)

notice is required to be provided.

Finally, the regulations clarify that

employees who have not yet become

participants in the plan are not taken

into account for any purpose under

section 204(h) of ERISA.1 Thus, the plan

administrator is not required to provide

section 204(h) notice to such employees.

The regulations provide that a plan

that is terminated in accordance with

title IV of ERISA is deemed to satisfy

section 204(h) not later than the date of

termination established under section

4048 of ERISA. Accordingly, section

204(h) does not require that any further

benefits accrue under the plan after that

date. However, if that date of

termination is deferred, benefits

continue to accrue until the deferred

date of termination absent an effective

cessation of accruals as of an earlier

specified date.

If the plan is not amended to

significantly reduce the rate of future

benefit accrual prior to the termination,

section 204(h) notice is not required.

However, the regulations also affirm

that section 204(h) applies to an

amendment that is effective prior to the

termination date and clarify that, if

section 204(h) notice is required, it can

be provided either with or as part of the

notice of intent to terminate or

separately.

The regulations also provide two rules

applicable in situations in which a plan

administrator was required to provide

section 204(h) notice with respect to an

amendment but failed to provide timely

notice to some of the parties to whom

notice was required to be provided. The

first rule applies when the plan

administrator fails to provide timely

notice with respect to more than a de

minimis percentage of the parties to

whom section 204(h) notice was

required. In such a situation, the

amendment becomes effective in

accordance with its terms with respect

to a participant to whom notice was

required if the participant was provided

with timely notice and any employee

organization representing the

participant was also provided with

timely notice. The amendment also

becomes effective in accordance with its

terms with respect to an alternate payee

to whom notice was required if the

alternate payee was provided with

timely notice.

The second rule applies in a situation

in which the plan administrator made a

good faith effort to comply with section

204(h) of ERISA with respect to an

amendment, failed to provide timely

section 204(h) notice to no more than a

de minimis percentage of the parties to

whom notice was required, and

provided timely notice to all employee

organizations with respect to whom

section 204(h) notice was required. In

such a situation, if the plan

administrator, promptly upon discovery

of the omission, provides section 204(h)

notice to all parties who were required

to be provided such notice but were

omitted, the plan amendment becomes

effective in accordance with its terms

with respect to all parties to whom

section 204(h) notice was required,

including those who did not receive

notice prior to discovery of the

omission.

Effective Dates

These temporary regulations are

effective for amendments adopted on or

after December 15, 1995, and

amendments effective by their terms on

or after January 2, 1996.

Special Analyses

It has been determined that this

Treasury decision is not a significant

regulatory action as defined in EO

12866. Therefore, a regulatory

assessment is not required. It also has

been determined that section 553(b) of

the Administrative Procedure Act (5

U.S.C. chapter 5) and the Regulatory

Flexibility Act (5 U.S.C. chapter 6) do

not apply to these regulations, and,

therefore, a Regulatory Flexibility

Analysis is not required. Pursuant to

section 7805(f) of the Internal Revenue

Code, these temporary regulations will

be submitted to the Chief Counsel for

Advocacy of the Small Business

Administration for comment on their

impact on small business.
64322 Federal Register / Vol. 60, No. 241 / Friday, December 15, 1995 / Rules and Regulations

Drafting Information: The principal author

of these regulations is Betty J. Clary, Office

of the Associate Chief Counsel (Employee

Benefits and Exempt Organizations), IRS.

However, other personnel from the IRS and

Treasury Department participated in their

development.

List of Subjects

26 CFR Part 1

Income taxes, Reporting and

recordkeeping requirements.

26 CFR Part 602

Reporting and recordkeeping

requirements.

Adoption of Amendments to the

Regulations

Accordingly, 26 CFR parts 1 and 602

are amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation

for part 1 is amended by adding an entry

for Section 1.411(d)–6T to read as

follows:

Authority: 26 U.S.C. 7805. * * *

Section 1.411(d)–6T also issued under

Reorganization Plan No. 4 of 1978, 29

U.S.C. 1001nt. * * *

Par. 2. § 1.411(d)–6T is added to read

as follows:

§ 1.411(d)–6T Section 204(h) notice.

Q–1: What are the requirements of

section 204(h) of the Employee

Retirement Income Security Act of 1974,

as amended (ERISA)?

A–1: (a) Requirements of section

204(h). Section 204(h) of ERISA

generally requires written notice of an

amendment to certain plans that

provides for a significant reduction in

the rate of future benefit accrual.

Section 204(h) generally requires the

notice to be provided to plan

participants, alternate payees, and

employee organizations. The plan

administrator must provide the notice

after adoption of the plan amendment

and not less than 15 days before the

effective date of the plan amendment.

(b) Other notice requirements. Other

provisions of law may require that

certain parties be notified of a plan

amendment. See, for example, sections

102 and 104 of ERISA, and the

regulations thereunder, for the

requirements relating to summary plan

descriptions and summaries of material

modifications.

Q–2: To which plans does section

204(h) of ERISA apply?

A–2: Section 204(h) of ERISA applies

to defined benefit plans subject to part

2 of subtitle B of title I of ERISA and to

individual account plans subject to such

part 2 and to the funding standards of

section 302 of ERISA. Accordingly,

individual account plans that are not

subject to the funding standards of

section 302, such as profit-sharing and

stock bonus plans, are not subject to

section 204(h).

Q–3: What is section 204(h) notice?

A–3: Action 204(h) notice is notice

that complies with section 204(h) of

ERISA and the rules in this section.

Q–4: For which amendments is

section 204(h) notice required?

A–4: (a) In general. Section 204(h)

notice is required for an amendment to

a plan described in Q&A–2 of this

section that provides for a significant

reduction in the rate of future benefit

accrual.

(b) Delegation of authority to

Commissioner. The Commissioner of

Internal Revenue may provide through

publication in the Internal Revenue

Bulletin of revenue rulings, notices, or

other documents (see § 601.601(d)(2) of

this chapter) that section 204(h) notice

need not be provided for plan

amendments otherwise described in

paragraph (a) of this Q&A–4 that the

Commissioner determines to be

necessary or appropriate, as a result of

changes in the law, to maintain

compliance with the requirements of the

Internal Revenue Code of 1986, as

amended (Code) (including

requirements for tax qualification),

ERISA, or other applicable federal law.

Q–5: What is an amendment that

affects the rate of future benefit accrual

for purposes of section 204(h) of ERISA?

A–5: (a) In general—(1) Defined

benefit plans. For purposes of section

204(h) of ERISA, an amendment to a

defined benefit plan affects the rate of

future benefit accrual only if it is

reasonably expected to change the

amount of the future annual benefit

commencing at normal retirement age.

(2) Individual account plans. For

purposes of section 204(h), an

amendment to an individual account

plan affects the rate of future benefit

accrual only if it is reasonably expected

to change the amounts allocated in the

future to participants’ accounts.

Changes in the investments or

investment options under an individual

account plan are not taken into account

for this purpose.

(b) Determination of rate of future

benefit accrual. In accordance with

paragraph (a) of this Q&A–5, the rate of

future benefit accrual is determined

without regard to optional forms of

benefit (other than the annual benefit

described in paragraph (a) of this Q&A–

5), early retirement benefits, or

retirement-type subsidies, within the

meaning of such terms as used in

section 411(d)(6) of the Code (section

204(g) of ERISA). The rate of future

benefit accrual is also determined

without regard to ancillary benefits and

other rights or features as defined in

§ 1.401(a)(4)–4(e).

(c) Examples. These examples

illustrate the rules in this Q&A–5:

Example 1. A plan is amended with

respect to future benefit accruals to eliminate

a right to commencement of a benefit prior

to normal retirement age. Because the

amendment does not affect the annual benefit

commencing at normal retirement age, it does

not reduce the rate of future benefit accrual

for purposes of section 204(h).

Example 2. A plan is amended to modify

the assumptions used in converting an

annuity form of distribution to a single sum

form of distribution. The use of these

modified assumptions results in a lower

single sum. Because the amendment does not

affect the annual benefit commencing at

normal retirement age, it does not reduce the

rate of future benefit accrual for purposes of

section 204(h).

Q–6: What plan provisions are taken

into account in determining whether

there has been a reduction in the rate of

future benefit accrual?

A–6: (a) Plan provisions taken into

account. All plan provisions that may

affect the rate of future benefit accrual

of participants or alternate payees must

be taken into account in determining

whether an amendment provides for a

significant reduction in the rate of

future benefit accrual. Such provisions

include, for example, the dollar amount

or percentage of compensation on which

benefit accruals are based; in the case of

a plan using the permitted disparity

under section 401(l) of the Code, the

amount of disparity between the excess

benefit percentage or excess

contribution percentage and the base

benefit percentage or base contribution

percentage (all as defined in section

401(l)); the definition of service or

compensation taken into account in

determining an employee’s benefit

accrual; the method of determining

average compensation for calculating

benefit accruals; the definition of

normal retirement age in a defined

benefit plan; the exclusion of current

participants from future participation;

benefit offset provisions; minimum

benefit provisions; the formula for

determining the amount of

contributions and forfeitures allocated

to participants’ accounts in an

individual account plan; and the

actuarial assumptions used to determine

contributions under a target benefit plan

(as defined in § 1.401(a)(4)–8(b)(3)(i)).

(b) Plan provisions not taken into

account. Plan provisions that do not
Federal Register / Vol. 60, No. 241 / Friday, December 15, 1995 / Rules and Regulations 64323

affect the rate of future benefit accrual

of participants or alternate payees are

not taken into account in determining

whether there has been a reduction in

the rate of future benefit accrual. For

example, provisions such as vesting

schedules or optional forms of benefit

(other than the annual benefit described

in Q&A–5(a) of this section) are not

taken into account.

(c) Examples. The following example

illustrates the rules in this Q&A–6:

Example. A defined benefit plan provides

a normal retirement benefit equal to 50% of

final average compensation times a fraction

(not in excess of one), the numerator of

which equals the number of years of

participation in the plan and the

denominator of which equals 20. A plan

amendment that changes the numerator or

denominator of that fraction must be taken

into account in determining whether there

has been a reduction in the rate of future

benefit accrual.

Q–7: What is the basic principle used

in determining whether an amendment

provides for a significant reduction in

the rate of future benefit accrual for

purposes of section 204(h) of ERISA?

A–7: Whether an amendment

provides for a significant reduction in

the rate of future benefit accrual for

purposes of section 204(h) of ERISA is

determined based on reasonable

expectations taking into account the

relevant facts and circumstances at the

time the amendment is adopted.

Q–8: Are employees who have not yet

become participants in a plan at the

time an amendment to the plan is

adopted taken into account for any

purpose in applying section 204(h) of

ERISA with respect to the amendment?

A–8: No. Employees who have not yet

become participants in a plan at the

time an amendment to the plan is

adopted are not taken into account for

any purpose in applying section 204(h)

of ERISA with respect to the

amendment. Thus, if section 204(h)

notice is required with respect to an

amendment, the plan administrator

need not provide section 204(h) notice

to such employees.

Q–9: If section 204(h) notice is

required with respect to an amendment,

must such notice be provided to

participants or alternate payees whose

rate of future benefit accrual is not

reduced by the amendment?

A–9: (a) In general. A plan

administrator need not provide section

204(h) notice to any participant whose

rate of future benefit accrual is

reasonably expected not to be reduced

by the amendment, nor to any alternate

payee under an applicable qualified

domestic relations order whose rate of

future benefit accrual is reasonably

expected not to be reduced by the

amendment. A plan administrator need

not provide section 204(h) notice to an

employee organization unless the

employee organization represents a

participant to whom section 204(h)

notice is required to be provided.

(b) Facts and circumstances test.

Whether a participant or alternate payee

is described in paragraph (a) of this

Q&A–9 is determined based on all

relevant facts and circumstances at the

time the amendment is adopted.

(c) Examples. The following examples

illustrate the rules in this Q&A–9:

Example 1. Plan A is amended to reduce

significantly the rate of future benefit accrual

of all current employees who are participants

in the plan. It is reasonable to expect based

on the facts and circumstances that the

amendment will not reduce the rate of future

benefit accrual of former employees who are

currently receiving benefits or that of former

employees who are entitled to vested

benefits. Accordingly, the plan administrator

is not required to provide section 204(h)

notice to such former employees.

Example 2. Assume in Example 1 that Plan

A also covers two groups of alternate payees.

The alternate payees in the first group are

entitled to a certain percentage or portion of

the former spouse’s accrued benefit, and for

this purpose the accrued benefit is

determined at the time the former spouse

begins receiving retirement benefits under

the plan. The alternate payees in the second

group are entitled to a certain percentage or

portion of the former spouse’s accrued

benefit, and for this purpose the accrued

benefit was determined at the time the

qualified domestic relations order was issued

by the court. It is reasonable to expect that

the benefits to be received by the second

group of alternate payees will not be affected

by any reduction in a former spouse’s rate of

future benefit accrual. Accordingly, the plan

administrator is not required to provide

section 204(h) notice to the alternate payees

in the second group.

Example 3. Plan B covers hourly

employees and salaried employees. Plan B

provides the same rate of benefit accrual for

both groups. The employer amends Plan B to

reduce significantly the rate of future benefit

accrual of the salaried employees only. At

that time, it is reasonable to expect that only

a small percentage of hourly employees will

become salaried in the future. Accordingly,

the plan administrator is not required to

provide section 204(h) notice to the

participants who are currently hourly

employees.

Example 4. Plan C covers employees in

Division M and employees in Division N.

Plan C provides the same rate of benefit

accrual for both groups. The employer

amends Plan C to reduce significantly the

rate of future benefit accrual of employees in

Division M. At that time, it is reasonable to

expect that in the future only a small

percentage of employees in Division N will

be transferred to Division M. Accordingly,

the plan administrator is not required to

provide section 204(h) notice to the

participants who are employees in Division

N.

Example 5. Assume the same facts as in

Example 4, except that at the time the

amendment is adopted, it is expected that

soon thereafter Division N will be merged

into Division M in connection with a

corporate reorganization (and the employees

in Division N will become subject to the

plan’s amended benefit formula applicable to

the employees in Division M). In this

instance, the plan administrator must

provide section 204(h) notice to the

participants who are employees in Division

M and to the participants who are employees

in Division N.

Q–10: Does a notice fail to comply

with section 204(h) of ERISA if it

contains a summary of the amendment

and the effective date, without the text

of the amendment itself?

A–10: No, the notice does not fail to

comply with section 204(h) of ERISA

merely because the notice contains a

summary of the amendment, rather than

the text of the amendment, if the

summary is written in a manner

calculated to be understood by the

average plan participant and contains

the effective date. The summary need

not explain how the individual benefit

of each participant or alternate payee

will be affected by the amendment.

Q–11: How may section 204(h) notice

be provided?

A–11: A plan administrator may use

any method reasonably calculated to

ensure actual receipt of the section

204(h) notice. First class mail to the last

known address of the party is an

acceptable delivery method. Likewise,

hand delivery is acceptable. Section

204(h) notice may be enclosed along

with other notice provided by the

employer or plan administrator.

Q–12: If a plan administrator fails to

provide section 204(h) notice to more

than a de minimis percentage of

participants and alternate payees to

whom section 204(h) notice is required

to be provided, will the plan

administrator be considered to have

complied with section 204(h) of ERISA

with respect to participants and

alternate payees who were provided

with timely section 204(h) notice?

A–12: The plan administrator will be

considered to have complied with

section 204(h) of ERISA with respect to

a participant to whom section 204(h)

notice is required to be provided if the

participant and any employee

organization representing the

participant were provided with timely

section 204(h) notice. The plan

administrator will be considered to have

complied with section 204(h) with

respect to an alternate payee to whom

section 204(h) notice is required to be

provided if the alternate payee was
64324 Federal Register / Vol. 60, No. 241 / Friday, December 15, 1995 / Rules and Regulations

provided with timely section 204(h)

notice. Accordingly, the amendment

will become effective in accordance

with its terms with respect to those

participants and alternate payees.

Q–13: Will a plan be considered to

have complied with section 204(h) of

ERISA if the plan administrator

provides section 204(h) notice to all but

a de minimis percentage of participants

and alternate payees to whom section

204(h) notice must be provided?

A–13: The plan will be considered to

have complied with section 204(h) of

ERISA and the amendment will become

effective in accordance with its terms

with respect to all parties to whom

section 204(h) notice was required to be

provided (including those who did not

receive notice prior to discovery of the

omission), if the plan administrator—

(a) Has made a good faith effort to

comply with the requirements of section

204(h);

(b) Has provided section 204(h) notice

to each employee organization that

represents any participant to whom

section 204(h) notice is required to be

provided;

(c) Has failed to provide section

204(h) notice to no more than a de

minimis percentage of participants and

alternate payees to whom section 204(h)

notice is required to be provided; and

(d) Provides section 204(h) notice to

those participants and alternate payees

promptly upon discovering the

oversight.

Q–14: How does section 204(h) of

ERISA apply to a plan that is terminated

in accordance with title IV of ERISA?

A–14: (a) On and after termination

date. Notwithstanding paragraph (b) of

this Q&A–14 or any other provisions of

this section, a plan that is terminated in

accordance with title IV of ERISA is

deemed to have satisfied section 204(h)

of ERISA not later than the termination

date (or date of termination, as

applicable) established under section

4048 of ERISA. Accordingly, section

204(h) would not require that any

additional benefits accrue after such

date.

(b) Amendment effective before

termination date. An amendment that is

effective before the termination date (or

date of termination, as applicable)

established under section 4048 of ERISA

is subject to section 204(h).

Accordingly, if such amendment

provides for a significant reduction in

the rate of future benefit accrual, the

plan administrator must provide section

204(h) notice (either separately or with

or as part of the notice of intent to

terminate) with respect to the

amendment. However, if a plan is not

amended to reduce significantly the rate

of future benefit accrual before the

termination date (for example, the plan

continues existing benefit accruals until

the termination date), section 204(h)

notice is not required.

Q–15: When does section 204(h) of

ERISA become effective?

A–15: (a) Statutory effective date.

With respect to defined benefit plans,

section 204(h) of ERISA generally

applies to plan amendments adopted on

or after January 1, 1986. With respect to

individual account plans, section 204(h)

applies to plan amendments adopted on

or after October 22, 1986.

(b) Regulatory effective date. This

section applies to amendments adopted

on or after December 15, 1995, and

amendments effective by their terms on

or after January 2, 1996.

PART 602—OMB CONTROL NUMBERS

UNDER THE PAPERWORK

REDUCTION ACT

Par. 6. The authority citation for part

602 continues to read as follows:

Authority: 26 U.S.C. 7805.

Par. 7. In § 602.101, paragraph (c) is

amended by adding to the table in

numerical order the entry ‘‘1.411(d)–6T

* * * .1545–1477’’.

Margaret Milner Richardson,

Commissioner of Internal Revenue.

Approved: December 5, 1995.

Leslie Samuels,

Assistant Secretary of the Treasury.

[FR Doc. 95–30416 Filed 12–12–95; 1:23 pm]

BILLING CODE 4830–01–U

PENSION BENEFIT GUARANTY

CORPORATION

29 CFR Parts 2621 and 2627

Limitation on Guaranteed Benefits in

Single-Employer Plans; Disclosure to

Participants

AGENCY: Pension Benefit Guaranty

Corporation.

ACTION: Final rule.

SUMMARY: This rule amends Appendix A

to the Limitation on Guaranteed

Benefits regulation of the Pension

Benefit Guaranty Corporation (‘‘PBGC’’)

by adding the maximum guaranteeable

pension benefit that may be paid by the

PBGC with respect to a plan participant

in a single-employer pension plan that

terminates in 1996. The maximum

guaranteeable benefit is computed in

accordance with the formula in section

4022(b)(3) of the Employee Retirement

Income Security Act of 1974, which

provides that the maximum

guaranteeable benefit is based on the

contribution and benefit base

determined under section 230 of the

Social Security Act. The latter number

is adjusted annually, and that

adjustment automatically changes the

dollar amount of the maximum

guaranteeable benefit paid by PBGC.

The effect of this amendment is to

advise plan participants and

beneficiaries of the increased maximum

guaranteeable benefit for 1996. This rule

also amends Appendix B to the PBGC’s

Disclosure to Participants regulation by

adding information on 1996 maximum

guaranteed benefit amounts. Plan

administrators may, subject to the

requirements of that regulation, include

this information in participant notices.

EFFECTIVE DATE: January 1, 1996.

FOR FURTHER INFORMATION CONTACT:

Harold J. Ashner, Assistant General

Counsel, Office of the General Counsel,

Pension Benefit Guaranty Corporation,

1200 K Street, NW., Washington, DC

20005–4026, 202–326–4024 (202–326–

4179 for TTY and TDD). (These are not

toll-free numbers.)

SUPPLEMENTARY INFORMATION: Section

4022(b) of the Employee Retirement

Income Security Act of 1974, as

amended, (‘‘ERISA’’) provides for

certain limitations on benefits

guaranteed by the Pension Benefit

Guaranty Corporation (‘‘PBGC’’) in

terminating single-employer pension

plans covered under Title IV of ERISA.

One of the limitations set forth in

section 4022(b)(3) is a dollar ceiling on

the amount of the monthly benefit that

may be paid to a plan participant by the

PBGC. Subparagraph (B) of section

4022(b)(3) provides that the amount of

monthly benefit payable in the form of

a life annuity beginning at age 65 shall

not exceed ‘‘$750 multiplied by a

fraction, the numerator of which is the

contribution and benefit base

(determined under section 230 of the

Social Security Act) in effect at the time

the plan terminates and the

denominator of which is such

contribution and benefit base in effect in

calendar year 1974 [$13,200]’’. This

formula is also set forth in § 2621.3(a)(2)

of the PBGC’s regulation entitled

Limitation on Guaranteed Benefits in

Single-Employer Plans (29 CFR Part

2621).

Section 230(d) of the Social Security

Act (42 U.S.C. 430(d)) provides special

rules for determining the contribution

and benefit base for purposes of section

4022(b)(3)(B). Each year the Social

Security Administration determines,

and notifies the PBGC of, the

contribution and benefit base to be used

by the PBGC under these provisions.