17216 Federal Register / Vol. 60, No. 65 / Wednesday, April 5, 1995 / Rules and Regulations

of this final rule to avoid the

interruption of ongoing investigations.

V. Environmental Impact

The agency has determined under 21

CFR 25.24(a)(8) and (e)(4) that this

action is of a type that does not

individually or cumulatively have a

significant effect on the human

environment. Therefore, neither an

environmental assessment nor an

environmental impact statement is

required.

VI. Analysis of Impacts

FDA has examined the impacts of the

final rule under Executive Order 12866

and the Regulatory Flexibility Act (Pub.

L. 96–354). Executive Order 12866

directs agencies to assess all costs and

benefits of available regulatory

alternatives and, when regulation is

necessary, to select regulatory

approaches that maximize net benefits

(including potential economic,

environmental, public health and safety,

and other advantages; distributive

impacts; and equity). The agency

believes that this final rule is consistent

with the regulatory philosophy and

principles identified in the Executive

Order. In addition, the final rule is not

a significant regulatory action as defined

by the Executive Order and so is not

subject to review under the Executive

Order.

The Regulatory Flexibility Act

requires agencies to analyze regulatory

options that would minimize any

significant impact of a rule on small

entities. Because the manufacturers of

these devices have been aware for a long

time, more than 10 years, of the need to

prepare PMA’s for these devices, the

agency certifies that the final rule will

not have a significant economic impact

on a substantial number of small

entities. Therefore, under the Regulatory

Flexibility Act, no further analysis is

required.

VII. References

The following references have been

placed on display in the Dockets

Management Branch (HFA–305), Food

and Drug Administration, rm. 1–23,

12420 Parklawn Dr., Rockville, MD

20857 and may be seen by interested

persons between 9 a.m and 4 p.m.

Monday through Friday.

1. Naim, J., and R.J. Lanzafame, ‘‘The

Adjuvant Effect of Silicone Gel on Antibody

Formation in Rats,’’ Immunological

Investigations, 22(2):151–161, 1993.

2. Bridges, A. J., C. Conley, G. Wang, D. E.

Burns, and F. B. Vasey, ‘‘A Clinical and

Immunologic Evaluation of Women With

Silicone Breast Implants and Symptoms of

Rheumatic Disease,’’ Annals of Internal

Medicine, 118(12):929–936, 1993.

3. Tripartite Biocompatibility Guidance for

Medical Devices, Office of Device Evaluation

General Program Memorandum #87–1, April

24, 1987.

List of Subjects in 21 CFR Part 876

Medical devices.

Therefore, under the Federal Food,

Drug, and Cosmetic Act and under

authority delegated to the Commissioner

of Food and Drugs, 21 CFR part 876 is

amended as follows:

PART 876—GASTROENTEROLOGY–

UROLOGY DEVICES

1. The authority citation for 21 CFR

part 876 is revised to read as follows:

Authority: Secs. 501, 510, 513, 515, 520,

522, 701 of the Federal Food, Drug, and

Cosmetic Act (21 U.S.C. 351, 360, 360c, 360e,

360j, 3601, 371).

2. Section 876.3750 is amended by

revising paragraph (c) to read as follows:

§ 876.3750 Testicular prosthesis.

* * * * *

(c) Date premarket approval

application (PMA) or notice of product

development protocol (PDP) is required.

A PMA or notice of completion of a PDP

is required to be filed with the Food and

Drug Administration on or before July 5,

1995, for any testicular prosthesis that

was in commercial distribution before

May 28, 1976, or that has on or before

July 5, 1995, been found to be

substantially equivalent to a testicular

prosthesis that was in commercial

distribution before May 28, 1976. Any

other testicular prosthesis shall have an

approved PMA or a declared completed

PDP in effect before being placed in

commercial distribution.

Dated: March 13, 1995.

D. B. Burlington,

Director, Center for Devices and Radiological

Health.

[FR Doc. 95–8383 Filed 4–4–95; 8:45 am]

BILLING CODE 4160–01–F

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 8591]

RIN 1545–AT28

Valuation of Plan Distributions

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Temporary regulations.

SUMMARY: This document contains

temporary regulations that provide

guidance to employers in determining

the present value of an employee’s

benefit under a qualified defined benefit

pension plan, for purposes of the

applicable consent rules and for

purposes of determining the amount of

a distribution made in any form other

than in certain nondecreasing annuity

forms. These temporary regulations are

issued to reflect changes to the

applicable law made by the Retirement

Protection Act of 1994 (RPA ’94), which

is part of the Uruguay Round

Agreements Act of 1994. RPA ’94

amended the law to change the interest

rate, and to specify the mortality table,

for the purposes described above. 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 in

the Proposed Rules section of this issue

of the Federal Register.

DATES: These regulations are effective

April 5, 1995.

These regulations apply to plan years

beginning after December 31, 1994,

except as provided in § 1.417(e)–

1T(d)(8) and (9).

FOR FURTHER INFORMATION CONTACT:

Linda S. F. Marshall, (202) 622–4606

(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Short Description

The temporary regulations in this

document set out rules for computing

the amount of any benefit under a

qualified defined benefit pension plan

that is paid in any form other than

certain annuity forms. These temporary

regulations reflect changes made to the

law in the Retirement Protection Act of

1994 (RPA ’94) Pub. L. 103–465. Under

the new law, if the annuity benefit an

employee could receive under the plan

is converted to a different form of

benefit, the non-annuity benefit cannot

be less than the value that would be

determined using legally required

assumptions regarding life expectancy

(mortality table) and interest rate. This

ensures that the non-annuity benefit

will not be less valuable than the

annuity benefit.

Under these temporary regulations,

the mortality table used under the new

law is the mortality table published by

the IRS (currently a mortality table

commonly used by state insurance

commissioners). The interest rate used

under the new law is the interest rate on

30-year Treasury securities, as

published by the IRS. These temporary

regulations allow an employer to choose

a monthly, quarterly, or annual period

during which the plan’s interest rate

remains constant, and allow an
Federal Register / Vol. 60, No. 65 / Wednesday, April 5, 1995 / Rules and Regulations 17217

employer to determine the rate up to

five months before the period begins.

These temporary regulations provide

that, for most pension plans in place on

December 7, 1994, the employer can

choose to have the new law become

effective any time between December 8,

1994, and the first day of the first plan

year beginning after December 31, 1999.

These temporary regulations also

specify how employers can amend their

pension plans to change the mortality

table and interest rate used to compute

the amount of a distribution, without

causing any prohibited reduction in

benefits.

Background

This document contains amendments

to the Income Tax Regulations (26 CFR

Part 1) under section 417(e). Section

417(e) was amended by RPA ’94. These

temporary regulations provide guidance

related to the determination of the

present value of an employee’s benefit

under a qualified defined benefit

pension plan in accordance with the

rules of section 417(e)(3).

The rules of section 417(e)(3) are also

relevant to the application of section

411(a)(11) and section 415(b). Section

411(a)(11) provides that a participant’s

benefit with a present value that

exceeds $3,500 can be immediately

distributed to a participant only with

the participant’s consent. Under section

411(a)(11)(B), as amended by RPA ’94,

the present value of a participant’s

benefit is calculated using the rules of

section 417(e)(3). Section 415(b) limits

the maximum benefit that can be

provided under a qualified defined

benefit plan. Under section

415(b)(2)(E)(ii), as amended by RPA ’94,

the minimum interest rate permitted to

be used for certain purposes to

determine compliance with the limit

under section 415(b) is the applicable

interest rate as defined in section

417(e)(3). Because the rules of section

417(e)(3) affect the application of

sections 411(a)(11)(B) and

415(b)(2)(E)(ii), the guidance provided

by these temporary regulations is

relevant to the application of those

provisions.

Explanation of Provisions

Section 417(e) restricts the ability of

certain qualified retirement plans to

distribute a participant’s benefit under

the plan without the consent of the

participant and, in many cases, the

participant’s spouse. The application of

these restrictions is determined based

on the present value of the participant’s

benefit. Prior to amendments made by

RPA ’94, section 417(e)(3) restricted the

interest rate to be used under a plan to

calculate the present value of a

participant’s benefit, but did not impose

any restrictions on the mortality table to

be used for that purpose.

Under § 1.417(e)–1(d), prior to

amendment by these temporary

regulations, the interest rate limitations

of section 417(e)(3) were applied in

determining whether participant or

spousal consent to a distribution was

necessary, in determining the present

value of any accrued benefit, and in

determining the amount of many types

of distributions. Further, under those

regulations, the present value of any

optional form of benefit could not be

less than the present value of the normal

retirement benefit determined in

accordance with the interest rate

restrictions of section 417(e)(3). Section

767 of RPA ’94 modified section

417(e)(3) to provide that the present

value of a participant’s benefit is not

less than the present value calculated by

using the applicable mortality table and

the applicable interest rate.

Applicable Mortality Table

The applicable mortality table under

section 417(e)(3) is defined as the table

prescribed by the Secretary based on the

prevailing commissioners’ standard

table (described in section 807(d)(5)(A))

used to determine reserves for group

annuity contracts issued on the date as

of which present value is being

determined (without regard to any other

subparagraph of section 807(d)(5)).

Currently, the prevailing

commissioners’ standard table is the

1983 Group Annuity Mortality Table.

See Rev. Rul. 92–19, 1992–1 C.B. 227.

These temporary regulations provide

that the applicable mortality table as

described above is to be prescribed by

the Commissioner in revenue rulings,

notices or other documents of general

applicability. That table is set forth in

Rev. Rul. 95–6, 1995–4 I.R.B. 22.

Applicable Interest Rate

Under section 417(e)(3), the

applicable interest rate is defined as the

annual rate of interest on 30-year

Treasury securities for the month before

the date of distribution or such other

time as the Secretary may by regulations

prescribe. These temporary regulations

provide that the applicable interest rate

for a month is the annual interest rate

on 30-year Treasury securities as

specified by the Commissioner for that

month. Currently, this interest rate is

the interest rate published in Federal

Reserve releases G.13 and H.15 as the

average yield on 30-year Treasury

Constant Maturities for the month. The

interest rates for July 1994 through

February 1995 are specified as follows:

7.58 percent for July 1994, 7.49 percent

for August 1994, 7.71 percent for

September 1994, 7.94 percent for

October 1994, 8.08 percent for

November 1994, 7.87 percent for

December 1994 (see Notice 95–6, 1995–

5 I.R.B. 47), 7.85 percent for January

1995 (see Notice 95–9, 1995–10 I.R.B.

10), and 7.61 percent for February 1995

(see Notice 95–11, 1995–13 I.R.B. 8).

The Commissioner will continue to

publish this interest rate for each

month, shortly after the end of the

month.

The interest rate on 30-year Treasury

Constant Maturities published monthly

in Federal Reserve releases G.13 and

H.15 can also be obtained by telephone

from the Public Information Department

of the Federal Reserve Bank of New

York at (212) 720–6130 (not a toll-free

number). Information regarding

subscriptions to Federal Reserve

releases G.13 and H.15 can be obtained

from the Publications Department of the

Federal Reserve Board of Governors at

(202) 452–3244 (not a toll-free number).

Time for Determining Applicable

Interest Rate

Section 417(e)(3)(A)(ii)(II) provides

that the applicable interest rate for

distributions made during a month is

the annual rate of interest on 30-year

Treasury securities for the month before

the date of distribution or such other

time as the Secretary may by regulations

prescribe. These temporary regulations

permit selection of a monthly, quarterly

or annual period during which the

applicable interest rate remains

constant. Permitting selection of such a

quarterly or annual stability period

allows plans to offer greater benefit

stability than is provided by the

statutory rule, under which the

applicable interest rate changes

monthly.

These temporary regulations provide

that the applicable interest rate for the

stability period may be determined as

the 30-year Treasury rate for any one of

the five calendar months preceding the

first day of the stability period.

Permitting this ‘‘lookback’’ of up to five

months provides added flexibility and

gives plan administrators and

participants more time to comply with

applicable notice and election

requirements using the actual interest

rate (instead of an estimate).

Thus, a plan may change the

applicable interest rate monthly,

quarterly, or annually, and may

determine the rate with reference to one

of the five months preceding the month,

quarter, or year. For example, if an

employer with a calendar year plan

wishes to use the same interest rate for
17218 Federal Register / Vol. 60, No. 65 / Wednesday, April 5, 1995 / Rules and Regulations

all distributions in the plan year (i.e.,

the annual stability period) and wishes

to provide 90 days for employee notices

based on the actual interest rate, the

plan can provide that the applicable

interest rate for the entire plan year is

the 30-year Treasury rate specified by

the Commissioner for the prior August

(i.e., five calendar months before

January 1, the first day of the plan year).

Effective Dates

These temporary regulations are

generally effective for plan years

beginning after December 31, 1994.

Under section 417(e)(3)(B) and these

temporary regulations, the general

effective date for the RPA ’94 rules is

delayed for certain plans until the first

plan year that begins after December 31,

1999, unless an employer takes earlier

action. The delayed effective date

applies to a plan adopted and in effect

before December 8, 1994, if the

provisions of the plan in effect on

December 7, 1994, met the requirements

of section 417(e)(3) as in effect on

December 7, 1994. For such a plan, the

present value of a distribution made

before the first day of the first plan year

that begins after December 31, 1999, is

calculated under the provisions of the

plan in effect on December 7, 1994, if

the annuity starting date for the

distribution occurs before the date a

plan amendment applying both the

applicable mortality table and the

applicable interest rate rules added by

RPA ’94 is adopted or, if later, is made

effective.

These temporary regulations restate

the rules applicable to plan years

beginning before January 1, 1995,

without substantive change. Those pre1995 rules also apply to later plan years,

to the extent that the application of the

RPA ’94 rules is delayed as described

above.

In addition, section 767(d)(1) of RPA

’94 permits an employer to elect to

accelerate the effective date of the RPA

’94 rules, and hence these temporary

regulations, in order to apply the RPA

’94 rules to distributions with annuity

starting dates occurring after December

7, 1994, in plan years beginning before

January 1, 1995. An employer that

makes a plan amendment applying the

applicable mortality table and the

applicable interest rate rules of these

regulations is treated as making this

election as of the date the plan

amendment is adopted or, if later, is

made effective.

Relationship With Section 411(d)(6)

Section 411(d)(6) provides that a plan

does not satisfy the requirements of

section 411 if the accrued benefit of a

participant is decreased by a plan

amendment. In general, a plan

amendment that changes the interest

rate or the mortality assumptions used

for purposes of determining the amount

of any accrued benefit is subject to

section 411(d)(6). Consistent with

regulations in effect prior to amendment

by these temporary regulations, these

temporary regulations provide limited

section 411(d)(6) relief for certain plan

amendments that change the time for

determining the applicable interest rate.

A plan amendment that changes the

time for determining the applicable

interest rate will not be treated as

violating section 411(d)(6), if each

distribution made until one year after

the later of the amendment’s effective

date or the amendment’s adoption date

is calculated using the time for

determining the applicable interest rate

as provided before or after the

amendment, whichever produces the

larger benefit. For this purpose, all other

plan provisions must be applied as in

effect after the amendment.

For example, assume that a calendar

year plan is amended in March 1995,

effective July 1, 1995, to change the

interest rate used to determine the

present value of plan distributions from

the PBGC interest rate determined as of

January 1 of the plan year that contains

the annuity starting date, to the 30-year

Treasury security interest rate for

August of the year before the plan year

that contains the annuity starting date.

The plan amendment will not be treated

as violating section 411(d)(6) if each

distribution with an annuity starting

date after June 30, 1995, and before July

1, 1996, is calculated using the 30-year

Treasury rate for August of the year

before the plan year that contains the

annuity starting date, or the 30-year

Treasury rate for January of the plan

year that contains the annuity starting

date, whichever produces the larger

benefit.

Section 767(d)(2) of RPA ’94 provides

that a participant’s accrued benefit is

not considered to be reduced in

violation of section 411(d)(6) merely

because the benefit is determined in

accordance with the applicable interest

rate rules and the applicable mortality

table rules of section 417(e)(3)(A), as

amended by RPA ’94. These temporary

regulations provide that an interest rate

may be eliminated under this section

411(d)(6) relief rule if that interest rate

is the PBGC interest rate or a rate based

on the PBGC interest rate. The PBGC has

advised the Service and Treasury that it

has not made any decision at this time

on whether it will continue to publish

the relevant interest rates after the year

2000. Therefore, in amending plans to

comply with these temporary

regulations, employers should not rely

on the continued publication of these

rates by the PBGC beyond the year 2000.

These temporary regulations further

provide that, where a plan provided for

the use of an interest rate not based on

the PBGC interest rate prescribed by

section 417(e)(3) as in effect before

amendments made by RPA ’94, a plan

amendment that eliminates the use of

that interest rate and the associated

mortality table may result in a reduction

of a participant’s accrued benefit, which

would violate the requirements of

section 411(d)(6). These temporary

regulations provide examples of the

application of section 411(d)(6) and the

special rule of section 767(d)(2) of RPA

’94, including an example illustrating

the use of a phase-in that provides for

a smoother transition from the plan’s

former terms to the new rules.

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.

Drafting Information

The principal author of these

regulations is Linda S. F. Marshall,

Office of the Associate Chief Counsel

(Employee Benefits and Exempt

Organizations). However, other

personnel from the IRS and Treasury

Department participated in their

development.

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and

recordkeeping requirements.

Adoption of Amendments to the

Regulations

Accordingly, 26 CFR part 1 is

amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation

for part 1 is amended by adding an entry

in numerical order to read as follows:

Authority: 26 U.S.C. 7805 * * *
Federal Register / Vol. 60, No. 65 / Wednesday, April 5, 1995 / Rules and Regulations 17219

Section 1.417(e)–1T also issued under 26

U.S.C. 417(e)(3)(A)(ii)(II).

Par. 2. In § 1.417(e)–1, paragraph (d) is

revised to read as follows:

§ 1.417(e)–1 Restrictions and valuations of

distributions from plans subject to sections

401(a)(11) and 417.

* * * * *

(d) Present value requirement. For

rules regarding the present value of a

participant’s accrued benefit and related

matters, see § 1.417(e)–1T(d).

* * * * *

Par. 3. § 1.417(e)–1T is added to read

as follows:

§ 1.417(e)–1T Restrictions and valuations

of distributions from plans subject to

sections 401(a)(11) and 417 (Temporary).

(a) through (c) [Reserved].

(d) Present value requirement—(1)

General rule. A defined benefit plan

must provide that the present value of

any accrued benefit and the amount

(subject to sections 411(c)(3) and 415) of

any distribution, including a single sum,

must not be less than the amount

calculated using the applicable interest

rate described in paragraph (d)(3) of this

section (determined for the month

described in paragraph (d)(4) of this

section) and the applicable mortality

table described in paragraph (d)(2) of

this section. The present value of any

optional form of benefit cannot be less

than the present value of the normal

retirement benefit determined in

accordance with the preceding sentence.

The same rules used for the plan under

this paragraph (d) must also be used to

compute the present value of the benefit

for purposes of determining whether

consent for a distribution is required

under paragraph (b) of this section.

(2) Applicable mortality table. The

applicable mortality table is the

mortality table based on the prevailing

commissioners’ standard table

(described in section 807(d)(5)(A)) used

to determine reserves for group annuity

contracts issued on the date as of which

present value is being determined

(without regard to any other

subparagraph of section 807(d)(5)), that

is prescribed by the Commissioner in

revenue rulings, notices, or other

guidance, published in the Internal

Revenue Bulletin (see

§ 601.601(d)(2)(ii)(b) of this chapter).

(3) Applicable interest rate—(i)

General rule. The applicable interest

rate for a month is the annual interest

rate on 30-year Treasury securities as

specified by the Commissioner for that

month in revenue rulings, notices or

other guidance, published in the

Internal Revenue Bulletin (see

§ 601.601(d)(2)(ii)(b) of this chapter).

(ii) Example. This example illustrates

the rules of this paragraph (d)(3):

Example. Plan A is a calendar year plan.

For its 1995 plan year, Plan A provides that

the applicable mortality table is the table

described in Rev. Rul. 95–6, 1995–4 I.R.B. 22,

and that the applicable interest rate for Plan

A is the annual interest rate on 30-year

Treasury securities as specified by the

Commissioner for the first full calendar

month preceding the calendar month that

contains the annuity starting date. Participant

P is age 65 in January 1995, which is the

month that contains P’s annuity starting date.

P has an accrued benefit payable monthly of

$1,000 and has elected to receive a

distribution in the form of a single sum in

January 1995. The annual interest rate on 30-

year Treasury securities as published by the

Commissioner for December 1994 is 7.87

percent. To satisfy the requirements of

section 417(e)(3) and this paragraph (d), the

single sum received by P may not be less

than $111,351.

(4) Time for determining interest

rate—(i) General rule. The applicable

interest rate to be used for a distribution

is the rate determined under paragraph

(d)(3) of this section for the applicable

lookback month. The applicable

lookback month for a distribution is the

lookback month (as described in

paragraph (d)(4)(iii) of this section) for

the month (or other longer stability

period described in paragraph (d)(4)(ii)

of this section) that contains the annuity

starting date for the distribution. The

time for determining the applicable

interest rate for each participant’s

distribution must be determined in a

consistent manner that is applied

uniformly to all participants in the plan.

(ii) Stability period. A plan must

specify the period for which the

applicable interest rate remains

constant. This stability period may be

one calendar month, one plan quarter,

or one plan year.

(iii) Lookback month. A plan must

specify the lookback month that is used

to determine the applicable interest rate.

The lookback month may be the first,

second, third, fourth, or fifth full

calendar month preceding the first day

of the stability period.

(iv) Additional determination dates.

The Commissioner may prescribe, in

revenue rulings, notices or other

guidance, published in the Internal

Revenue Bulletin (see

§ 601.601(d)(2)(ii)(b)), other times that a

plan may provide for determining the

applicable interest rate.

(v) Example. This example illustrates

the rules of this paragraph (d)(4).

Example. Employer X maintains Plan A, a

calendar year plan. Employer X wishes to

amend Plan A so that the applicable interest

rate will remain fixed for each plan quarter,

and so that the applicable interest rate for

distributions made during each plan quarter

can be determined approximately 80 days

before the beginning of the plan quarter. To

comply with the provisions of this paragraph

(d)(4), Plan A is amended to provide that the

applicable interest rate is the annual interest

rate on 30-year Treasury securities as

specified by the Commissioner for the fourth

calendar month preceding the first day of the

plan quarter during which the annuity

starting date occurs.

(5) Use of alternative interest rate and

mortality table. If a plan provides for

use of an interest rate or mortality table

other than the applicable interest rate or

the applicable mortality table, the plan

must provide that a participant’s benefit

must be at least as great as the benefit

produced by using the applicable

interest rate and the applicable

mortality table. For example, where a

plan provides for use of an interest rate

of 7% and the UP–1984 Mortality Table

(see § 1.401(a)(4)–12, Standard mortality

table) in calculating single-sum

distributions, the plan must provide that

any single-sum distribution is

calculated as the greater of the singlesum benefit calculated using this

actuarial basis (i.e., 7% and the UP–

1984 Mortality Table) and the single

sum calculated using the applicable

interest rate and the applicable

mortality table.

(6) Exceptions. This paragraph (d)

(other than the provisions relating to

section 411(d)(6) requirements in

paragraph (d)(10) of this section) does

not apply to the amount of a

distribution under a nondecreasing

annuity payable for a period not less

than the life of the participant or, in the

case of a QPSA, the life of the surviving

spouse. A nondecreasing annuity

includes a QJSA, QPSA and an annuity

that decreases merely because of the

cessation or reduction of Social Security

supplements or qualified disability

payments (as defined in section

411(a)(9)).

(7) Defined contribution plans.

Because the accrued benefit under a

defined contribution plan equals the

account balance, a defined contribution

plan is not subject to the requirements

of this paragraph (d), even though it is

subject to section 401(a)(11).

(8) Effective date—(i) In general. This

paragraph (d) is effective for

distributions with annuity starting dates

in plan years beginning after December

31, 1994.

(ii) Optional delayed effective date of

Retirement Protection Act of 1994 (RPA

’94)(108 Stat. 5012) rules for plans

adopted and in effect before December

8, 1994. For a plan adopted and in effect

before December 8, 1994, the

application of the rules relating to the
17220 Federal Register / Vol. 60, No. 65 / Wednesday, April 5, 1995 / Rules and Regulations

applicable mortality table and

applicable interest rate under

paragraphs (d) (2) through (4) of this

section is delayed to the extent provided

in this paragraph (d)(8)(ii), if the plan

provisions in effect on December 7,

1994, met the requirements of section

417(e)(3) and § 1.417(e)–1(d) as in effect

on December 7, 1994 (as contained in 26

CFR part 1 revised April 1, 1995). In the

case of a distribution from such a plan

with an annuity starting date that

precedes the optional delayed effective

date described in paragraph (d)(8)(iv) of

this section, and that precedes the first

day of the first plan year beginning after

December 31, 1999, the rules of

paragraph (d)(9) of this section (which

generally apply to distributions with

annuity starting dates in plan years

beginning before January 1, 1995) apply

in lieu of the rules of paragraphs (d) (2)

through (4) of this section. The interest

rate under the rules of paragraph (d)(9)

of this section is determined under the

provisions of the plan as in effect on

December 7, 1994, reflecting the interest

rate or rates published by the Pension

Benefit Guaranty Corporation (PBGC)

and the provisions of the plan for

determining the date on which the

interest rate is fixed. The above

described interest rate or rates

published by the PBGC are those

determined by the PBGC (for the date

determined under those plan

provisions) pursuant to the PBGC’s

methodology under the regulations of

the PBGC for determining the present

value of a lump sum distribution on

plan termination under 29 CFR Part

2619 that were in effect on September

1, 1993 (as contained in 29 CFR part

2619 revised July 1, 1994).

(iii) Optional accelerated effective

date of RPA ’94 rules. This paragraph

(d) is also effective for a distribution

with an annuity starting date after

December 7, 1994, during a plan year

beginning before January 1, 1995, if the

employer elects, on or before the

annuity starting date, to make the rules

of this paragraph (d) effective with

respect to the plan as of the optional

accelerated effective date described in

paragraph (d)(8)(iv) of this section. An

employer is treated as making this

election by making the plan

amendments described in paragraph

(d)(8)(iv) of this section.

(iv) Determination of delayed or

accelerated effective date by plan

amendment adopting RPA ’94 rules.

The optional delayed effective date of

paragraph (d)(8)(ii) of this section, or the

optional accelerated effective date of

paragraph (d)(8)(iii) of this section,

whichever is applicable, is the date plan

amendments applying both the

applicable mortality table of paragraph

(d)(2) of this section and the applicable

interest rate of paragraph (d)(3) of this

section are adopted or, if later, are made

effective.

(9) Plan years beginning before

January 1, 1995—(i) Interest rate. (A)

For distributions made in plan years

beginning after December 31, 1986, and

before January 1, 1995, the following

interest rate described in paragraph

(d)(9)(i)(A)(1) or (2) of this section,

whichever applies, is substituted for the

applicable interest rate for purposes of

this section—

(1) The rate or rates that would be

used by the PBGC for a trusteed singleemployer plan to value the participant’s

(or beneficiary’s) vested benefit (PBGC

interest rate) if the present value of such

benefit does not exceed $25,000; or

(2) 120 percent of the PBGC interest

rate, as determined in accordance with

paragraph (d)(9)(i)(A)(1) of this section,

if such present value exceeds $25,000.

In no event shall the present value

determined by use of 120 percent of the

PBGC interest rate result in a present

value less than $25,000.

(B) The PBGC interest rate may be a

series of interest rates for any given

date. For example, the PBGC interest

rate for immediate annuities for

November 1994 is 6%, and the PBGC

interest rates for the deferral period for

that month are as follows: 5.25% for the

first 7 years of the deferral period, 4%

for the following 8 years of the deferral

period, and 4% for the remainder of the

deferral period. For November 1994, 120

percent of the PBGC interest rate is

7.2% (1.2 times 6%) for an immediate

annuity, 6.3% (1.2 times 5.25%) for the

first 7 years of the deferral period, 4.8%

(1.2 times 4%) for the following 8 years

of the deferral period, and 4.8% (1.2

times 4%) for the remainder of the

deferral period. The PBGC interest rates

are the interest rates that would be used

(as of the date of the distribution) by the

PBGC for purposes of determining the

present value of that benefit upon

termination of an insufficient trusteed

single employer plan. Except as

otherwise provided by the

Commissioner, the PBGC interest rates

are determined by PBGC regulations.

See 29 CFR part 2619 for the applicable

PBGC rates.

(ii) Time for determining interest rate.

(A) Except as provided in paragraph

(d)(9)(ii)(B) of this section, the PBGC

interest rate or rates are determined on

either the annuity starting date or the

first day of the plan year that contains

the annuity starting date. The plan must

provide which date is applicable.

(B) The plan may provide for the use

of any other time for determining the

PBGC interest rate or rates provided that

such time is not more than 120 days

before the annuity starting date if such

time is determined in a consistent

manner and is applied uniformly to all

participants.

(C) The Commissioner may, in

revenue rulings, notices or other

guidance, published in the Internal

Revenue Bulletin (see

§ 601.601(d)(2)(ii)(b)), prescribe other

times for determining the PBGC interest

rate or rates.

(iii) No applicable mortality table. In

the case of a distribution to which this

paragraph (d)(9) applies, the rules of

this paragraph (d) are applied without

regard to the applicable mortality table

described in paragraph (d)(2) of this

section.

(10) Relationship with section

411(d)(6)—(i) In general. Except as

provided in this paragraph (d)(10), a

plan amendment that changes the

interest rate, the time for determining

the interest rate, or the mortality

assumptions used for the purposes

described in paragraph (d)(1) of this

section is subject to section 411(d)(6).

But see § 1.411(d)-4, Q&A 2(b)(2)(v)

(regarding plan amendments relating to

involuntary distributions).

(ii) Change in time for determining

interest rate. Notwithstanding the

general rule of paragraph (d)(10)(i) of

this section, if a plan amendment

changes the time for determining the

applicable interest rate (including an

indirect change as a result of a change

in plan year), the amendment will not

be treated as reducing accrued benefits

in violation of section 411(d)(6) merely

on account of this change if the

conditions of this paragraph (d)(10)(ii)

are satisfied. Any distribution for which

the annuity starting date occurs in the

one-year period commencing at the time

the plan amendment is effective (if the

amendment is effective on or after the

adoption date) must use the interest rate

as provided under the terms of the plan

after the effective date of the

amendment, determined at either the

date for determining the interest rate

before the amendment or the date for

determining the interest rate after the

amendment, whichever results in the

larger distribution. If the plan

amendment is adopted retroactively

(that is, the amendment is effective prior

to the adoption date), the plan must use

the interest rate determination date

resulting in the larger distribution for

the period beginning with the effective

date and ending one year after the

adoption date.

(iii) Section 411(d)(6) relief for plan

amendments pursuant to changes to

section 417 made by RPA ’94—(A)
Federal Register / Vol. 60, No. 65 / Wednesday, April 5, 1995 / Rules and Regulations 17221

Replacement of PBGC interest rate. A

participant’s accrued benefit is not

considered to be reduced in violation of

section 411(d)(6) merely because of a

plan amendment that changes any

interest rate or mortality assumption

used to calculate the present value of a

participant’s benefit under the plan

(even if the amendment provides for

temporary additional benefits to

accommodate a more gradual transition

from the plan’s old interest rate to the

new rules), if the following conditions

are satisfied—

(1) The amendment replaces the

PBGC interest rate (or an interest rate or

rates based on the PBGC interest rate) as

the interest rate used under the plan in

determining the present value of a

participant’s benefit under this

paragraph (d); and

(2) After the amendment is effective,

the present value of a participant’s

benefit under the plan cannot be less

than the amount calculated using the

applicable mortality table and the

applicable interest rate for the first full

calendar month preceding the calendar

month that contains the annuity starting

date.

(B) Replacement of non-PBGC interest

rate. The section 411(d)(6) relief

provided in paragraph (d)(10)(iii)(A) of

this section does not apply to a plan

amendment that replaces an interest rate

other than the PBGC interest rate (or an

interest rate or rates based on the PBGC

interest rate) as an interest rate used

under the plan in determining the

present value of a participant’s benefit

under this paragraph (d). Thus, the

accrued benefit determined using that

interest rate and the associated mortality

table is protected under section

411(d)(6). For purposes of paragraphs

(d)(10)(iii)(A) and (B) of this section, an

interest rate is based on the PBGC

interest rate if the interest rate is defined

as a specified percentage of the PBGC

interest rate or as the PBGC interest rate

minus a specified number of basis

points.

(C) Plan amendment providing for

prior determination date or up to two

months earlier. If the special rule of

paragraph (d)(10)(iii)(A) of this section

would apply to a plan except that the

applicable interest rate is determined for

a month other than the first full

calendar month preceding the calendar

month that contains the annuity starting

date, a participant’s accrued benefit is

not considered to be reduced in

violation of section 411(d)(6) if the

applicable interest rate is determined for

the calendar month that contains the

date as of which the PBGC interest rate

was determined immediately before the

amendment, or for one of the two

calendar months immediately preceding

that month, or if the plan amendment

satisfies the conditions of paragraph

(d)(10)(ii) of this section.

(D) Examples. The provisions of this

paragraph (d)(10)(iii) are illustrated by

the following examples:

Example 1. On December 31, 1994, Plan A

provided that all single-sum distributions

were to be calculated using the UP–1984

Mortality Table and 100% of the PBGC

interest rate for the date of distribution. On

January 4, 1995, and effective on February 1,

1995, Plan A was amended to provide that

all single-sum distributions are calculated

using the applicable mortality table and the

annual interest rate on 30-year Treasury

securities for the first full calendar month

preceding the calendar month that contains

the annuity starting date. This amendment of

Plan A is not considered to reduce the

accrued benefit of any participant in

violation of section 411(d)(6).

Example 2. On December 31, 1994, Plan B

provided that all single-sum distributions

were to be calculated using the UP–1984

Mortality Table and an interest rate equal to

the lesser of 100% of the PBGC interest rate

for the date of distribution, or 6%. On

January 4, 1995, and effective on February 1,

1995, Plan B was amended to provide that all

single-sum distributions are calculated using

the applicable mortality table and the annual

interest rate on 30-year Treasury securities

for the second full calendar month preceding

the calendar month that contains the annuity

starting date. The 6% interest rate provided

for under the plan is not based on the PBGC

interest rate. Therefore, to satisfy the

requirements of section 411(d)(6), the plan

must provide that the single-sum distribution

payable to any participant must be no less

than the single-sum distribution calculated

using the UP–1984 Mortality Table and an

interest rate of 6%, based on the participant’s

benefits under the plan accrued through

January 31, 1995, and based on the

participant’s age at the annuity starting date.

Example 3. (a) Employer X maintains Plan

C, a calendar year plan. As of December 7,

1994, Plan C provided for single-sum

distributions to be calculated using the PBGC

interest rate as of the annuity starting date for

distributions not greater than $25,000, and

120% of that interest rate (but not an interest

rate producing a present value less than

$25,000) for distributions over $25,000.

Employer X wishes to delay the effective date

of the RPA ’94 rules for a year, and to provide

for an extended transition from the use of the

PBGC interest rate to the new applicable

interest rate under section 417(e)(3). On

December 1, 1995, and effective on January

1, 1996, Employer X amends Plan C to

provide that single-sum distributions are

determined as the sum of—

(i) The single-sum distribution calculated

based on the applicable mortality table and

the annual interest rate on 30-year Treasury

securities for the first full calendar month

preceding the calendar month that contains

the annuity starting date; and

(ii) A transition amount.

(b) The amendment provides that the

transition amount for distributions in the

years 1996–99 is a transition percentage of

the excess, if any, of the amount that the

single-sum distribution would have been

under the plan provisions in effect prior to

this amendment over the amount of the

single sum described in paragraph (a)(i) of

this Example 3. The transition percentages

are 80% for 1996, decreasing to 60% for

1997, 40% for 1998 and 20% for 1999. The

amendment also provides that the transition

amount is zero for plan years beginning on

or after the year 2000. Plan C is not

considered to have reduced the accrued

benefit of any participant in violation of

section 411(d)(6) by reason of this plan

amendment.

Margaret Milner Richardson,

Commissioner of Internal Revenue.

Approved: March 15, 1995.

Leslie Samuels,

Assistant Secretary of the Treasury.

[FR Doc. 95–8229 Filed 4–4–95; 8:45 am]

BILLING CODE 4830–01–U

DEPARTMENT OF LABOR

Wage and Hour Division

29 CFR Part 580

Civil Money Penalties—Procedures for

Assessing and Contesting Penalties

AGENCY: Wage and Hour Division,

Employment Standards Administration,

Labor.

ACTION: Final rule.

SUMMARY: The purpose of this document

is to change the address listed in § 580.6

of Regulations 29 CFR part 580, which

is used for administrative hearing

requests. This revision is being made in

order to streamline the process by

which hearing requests are

acknowledged by consolidating all

aspects of processing hearing requests

into the operations of the office which

issued the administrative determination

upon which the request for a hearing is

based.

EFFECTIVE DATE: This rule is effective

April 5, 1995.

FOR FURTHER INFORMATION CONTACT: J.

Dean Speer, Director, Division of Policy

and Analysis, Wage and Hour Division,

Employment Standards Administration,

U.S. Department of Labor, Room S–

3506, 200 Constitution Avenue NW.,

Washington, DC 20210. Telephone (202)

219–8412. This is not a toll free number.

SUPPLEMENTARY INFORMATION:

I. Paperwork Reduction Act

This rule imposes no reporting or

recordkeeping requirements on the

public.