Court Opinion

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Opinions of the United
2006 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

7-27-2006

Stepnowski v. Commissioner IRS
Precedential or Non-Precedential: Precedential

Docket No. 05-3665

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                                  PRECEDENTIAL

 UNITED STATES COURT OF APPEALS
      FOR THE THIRD CIRCUIT

               No. 05-3665

      CHARLES P. STEPNOWSKI,

                                Appellant

                     v.

COMMISSIONER OF INTERNAL REVENUE;
    HERCULES INCORPORATED

      Appeal from the Decision of the
          United States Tax Court
            Docket No. 03-08383
Tax Court Judge: Honorable Mary Ann Cohen

           Argued June 8, 2006

       Before: AMBRO, FUENTES
      and NYGAARD, Circuit Judges

       (Opinion filed: July 27, 2006)
Mervin M. Wilf, Esquire (Argued)
Mervin M. Wilf, Ltd.
One South Broad Street, Suite 1630
Philadelphia, PA 19107

      Counsel for Appellant

Eileen J. O’Connor
  Assistant Attorney General
Kenneth L. Greene, Esquire
Steven W. Parks, Esquire (Argued)
United States Department of Justice
Tax Division
P.O. Box 502
Washington, DC 20044

David S. Fryman, Esquire (Argued)
Brian M. Pinheiro, Esquire
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103

      Counsel for Appellees

               OPINION OF THE COURT

AMBRO, Circuit Judge

                              2
        Congress changed the applicable interest rate for the
present-value calculation of pension plans’ lump-sum payments
to retirees. Hercules Inc. later amended its pension plan to
match the changed interest rate, but that amendment resulted in
a lower lump-sum payment to Charles Stepnowski, who retired
several months after the amendment. To determine whether
Hercules’ amendment was valid, we decide whether the
Commissioner of the Internal Revenue Service extended the
deadline for this amendment. We hold that the Commissioner
did so, and that Hercules’ amendment was timely and valid. We
therefore affirm.

      I. Factual Background and Procedural History

       Stepnowski worked at Hercules from 1973 to December
2002. He participated in Hercules’ retirement plan, which
allows participants to take a lump-sum payment upon
retirement. This payment is the present-value equivalent of 51%
of the retiree’s expected lifetime monthly pension benefits.
Pension Plan of Hercules Inc., sched. B., art. VII, § D.1. The
present-value amount is calculated using the federally prescribed
mortality table and a specified interest rate. Id. § D.4.

        Hercules has a defined-benefit plan under the Employee
Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et
seq. It was established in 1913 and uses the calendar year as its
plan year. Hercules made amendments to the plan in October

                               3
2001.1

       The amendments to Hercules’ plan changed the interest
rate used to calculate lump-sum payments. For payments made
on or after January 1, 2002, the present-value amount is
calculated using the interest rate on 30-year Treasury securities.
Pension Plan, sched. B., art. VII, § D.4.a(2). The Treasury rate
took the place of the interest rate published by the Pension
Benefit Guaranty Corporation (PBGC).2

     Interest rates bear an inverse relationship to present-value
amounts; a higher interest rate results in a lower present-value

      1
      This statement of the facts is contested by the parties.
Hercules claims that the plan was amended in October 2001.
Stepnowski, on the other hand, argues that it was amended as of
January 28, 2002. Hercules’ Finance Committee passed a
resolution amending the plan in October 2001, and Hercules’
Board of Directors appears to have confirmed the resolution in
January 2002. The Tax Court stated that Hercules “executed”
the amendments in January 2002. Stepnowski v. Comm’r, 124
T.C. 198, 200 (2005). In any event, the difference in dates is
immaterial to our conclusion in this case.
  2
    Under the amendment, the plan calculated the present-value
amount for payments made between January 1, 2000, and
January 1, 2002, using both the Treasury rate and the PBGC
rate, and the retiree got the higher of the two amounts that result.
Pension Plan, sched. B, art. VII, § D.4.b. Stepnowski, however,
retired after January 2002.

                                 4
payment, and vice versa.3 The Treasury rate has historically
been higher than the PBGC rate, so—because he retired after
January 2002 (i.e., after the amendment)—Stepnowski’s lump-
sum payment was lower than it would have been had Hercules
kept the PBGC rate.4

       In February 2002, Hercules requested a determination
from the Commissioner that its pension plan met all of the
statutory qualification requirements.     In March 2002,
Stepnowski sent the Commissioner a letter contending that the
amendment precluded the Hercules plan from so qualifying. In
March 2003, the Commissioner issued Hercules a favorable
determination letter on the plan. Stepnowski then filed a
petition in the United States Tax Court for a declaratory
judgment that the Hercules plan was not qualified.

    The Tax Court held in favor of Hercules and the
Commissioner, Stepnowski v. Comm’r, 124 T.C. 198, 220

 3
   This is so because the typical present-value formula involves
division by the interest rate. Thus, as the interest rate gets
higher, the numerator is divided by a larger number, resulting in
a lower present value.
     4
     The parties estimate that Stepnowksi got $25,000 less
because of the plan amendment.

                               5
(2005), and Stepnowski appeals.5

                        II. Discussion

       A. Statutory and regulatory background

       Section 401(a) of the Internal Revenue Code describes
the qualification requirements for pension plans. (Only
qualified plans are tax exempt under I.R.C. § 501(a).) One of
the requirements in § 401(a) is that, “except as provided in
section 417,” the plan must pay out a vested participant’s
accrued benefit “in the form of a qualified joint and survivor
annuity.” I.R.C. § 401(a)(11)(A). Section 417 allows plan
participants to waive these annuity payments in favor of a “cash-
out”—that is, a lump-sum payment of the participants’ annuity
benefits. See id. § 417(a).

      Plan participants can therefore choose to take a lump-sum
cash-out payment of the present value of their annuity, and
§ 417(e) governs the determination of that present-value
amount. Specifically, § 417(e)(3)(A)(i) provides that the present
value of a participant’s benefits “shall not be less than the

  5
       The Tax Court had jurisdiction under I.R.C. § 7476(a).
We have appellate jurisdiction under I.R.C. § 7482(a).
       “We review the Tax Court’s legal determinations de
novo, but we do not disturb its factual findings unless they are
clearly erroneous.” Lattera v. Comm’r, 437 F.3d 399, 401 (3d
Cir. 2006).

                               6
present value calculated by using the applicable mortality table
and the applicable interest rate.”

        The “applicable interest rate” is a statutorily defined
term. Before 1994, it meant the PBGC interest rate. Tax
Reform Act of 1986, Pub. L. No. 99-514, § 1139(b), 100 Stat.
2085, 2487. In 1994, Congress changed the definition in
§ 417(e)(3)(A)(ii)(II); it now means “the annual rate of interest
on 30-year Treasury securities.” (The change was made as part
of the Retirement Protection Act of 1994, which was itself part
of the Uruguay Round Agreements Act. Pub. L. No. 103-465,
tit. VII, subtit. F, § 767(a)(2), 108 Stat. 4809, 5038.)

        Elsewhere in the Code lurks § 411, which controls
vesting standards; a plan cannot be qualified unless it satisfies
this section. I.R.C. §§ 401(a)(7), 411(a). Specifically,
§ 411(d)(6)—known as the “anti-cutback provision”—blocks
plan amendments that decrease participants’ accrued benefits.
See id. § 411(d)(6)(A); see also id. § 411(d)(6)(B) (“[A] plan
amendment which has the effect of . . . eliminating or reducing
an early retirement benefit . . . with respect to benefits
attributable to service before the amendment shall be treated as
reducing accrued benefits.”).

       As noted, because the Treasury interest rate is generally
higher than the PBGC rate, the normal result is a lower lump-
sum payout (as happened here). Once the Retirement Protection
Act changed the statutory rate, plan amendments following that

                               7
change could have been in danger of triggering the anti-cutback
provision. Congress accordingly provided that “[a] participant’s
accrued benefit shall not be considered to be reduced in
violation of section 411(d)(6) . . . merely because . . . the benefit
is determined in accordance with section 417(e)(3)(A) . . . , as
amended by this Act.” Retirement Protection Act § 767(d), 108
Stat. at 5040. The Department of the Treasury followed suit,
providing that plan amendments replacing the PBGC rate with
the Treasury rate were not cutbacks. Treas. Reg. § 1.417(e)-
1(d)(10)(iv).6

      B. Does Treasury Regulation § 1.417(e)-1(d)(10)(i)
contain an amendment deadline?

       Stepnowski’s unhappiness with the Treasury rate, as
compared to the PBGC rate, is ultimately due to an act of
Congress. He cannot complain that Hercules amended its plan
to match the statutory interest rate, so he is forced to argue about
when Hercules amended the plan. Stepnowski concedes that
Hercules could have amended the plan without penalty on or
before December 31, 1999, but he claims that the Treasury

   6
     This Regulation contains two conditions: First, the plan
amendment has to replace the PBGC rate. Treas. Reg.
§ 1.417(e)-1(d)(10)(iv)(A). Second, the replacement rate has to
be no higher than the Treasury rate, as calculated at certain
times. Id. § 1.417(e)-1(d)(10)(iv)(B). We agree with the Tax
Court that Hercules’ plan amendment satisfied both of these
conditions. See Stepnowski, 124 T.C. 210–11.

                                 8
Regulations imposed that date as a deadline on such interest-rate
amendments and that it was not extended.

        The Regulation at issue is Treas. Reg. § 1.417(e)-
1(d)(10)(i), which provides that a prospective plan amendment
that “changes the interest rate or the mortality assumptions used
for the [present-value calculation] merely to eliminate use of the
[PBGC] interest rate . . . , or the applicable mortality table, with
respect to a distribution form described in paragraph (d)(6) of
this section,” is not a cutback if it is adopted by December 31,
1999.

        Stepnowski therefore argues that paragraph (d)(10)(i)
requires interest-rate amendments like Hercules’ to be in place
on or before December 31, 1999. The Commissioner
argues—and the Tax Court held—that the December 1999
deadline did not apply to the Hercules amendment. Both
parties’ arguments turn on whether the phrase “with respect to
a distribution form described in paragraph (d)(6) of this section”
modifies “mortality table” alone or both “interest rate” and
“mortality table.” The distribution form described in paragraph
(d)(6) is a nondecreasing annual benefit—in other words, not a
lump-sum payment like in Hercules’ plan. Thus, if the phrase
modifies both “mortality table” and “interest rate,” this
provision does not apply to amendments like Hercules’.

       The debate is between the last-antecedent rule of
construction and its grammatical corollary. The last-antecedent

                                 9
rule generally holds “that qualifying words, phrases, and clauses
are to be applied to the words or phrase immediately preceding
and not to others more remote.” United States v. Hodge, 321
F.3d 429, 436 (3d Cir. 2003) (internal quotation marks omitted).
The corollary rule of grammar generally states that, where there
is a comma before a modifying phrase, that phrase modifies all
of the items in a series and not just the immediately preceding
item. See, e.g., Elliot Coal Mining Co. v. Dir., 17 F.3d 616, 630
(3d Cir. 1994) (“Th[e] use of a comma to set off a modifying
phrase from other clauses indicates that the qualifying language
is to be applied to all of the previous phrases and not merely the
immediately preceding phrase.”); Nat’l Sur. Corp. v. Midland
Bank, 551 F.2d 21, 34 (3d Cir. 1977); see also Kahn Lucas
Lancaster, Inc. v. Lark Int’l Ltd., 186 F.3d 210, 215, 216 n.1 (2d
Cir. 1999), abrogated in part on other grounds by Sarhank
Group v. Oracle Corp., 404 F.3d 657, 660 n.2 (2d Cir. 2005);
Bingham, Ltd. v. United States, 724 F.2d 921, 925 n.3 (11th Cir.
1984).7

  7
   Under the last-antecedent rule of construction, therefore, the
series “A or B with respect to C” contains two items: (1) “A”
and (2) “B with respect to C.” On the other hand, under the rule
of grammar the series “A or B, with respect to C” contains these
two items: (1) “A with respect to C” and (2) “B with respect to
C.” See Kahn Lucas, 186 F.3d at 216 n.1.
       Compare the Fifth Amendment of the Constitution, which
provides that no person shall “be deprived of life, liberty, or
property, without due process of law.” The comma before the
phrase “without due process of law” indicates that the phrase

                               10
        But neither of these aids in construction is dispositive;
they serve only as guides. Moreover, the only other sentence in
paragraph (d)(10)(i) fails to use this grammatical
construction—in a situation where the modifying phrase almost
certainly applies to all three elements in a series.8 Our
confidence in paragraph (d)(10)(i)’s correct comma placement
is thereby diminished. Thus we express no opinion on whether
the deadline applied to Hercules. But our subsequent analysis
makes clear that, even if there were a deadline imposed, the
Commissioner extended it. So the question of whether there
was a deadline need not be answered here.

     C.   If there was a deadline for interest-rate
amendments, was it extended?

       For this analysis, we assume without deciding that a

modifies “life,” “liberty,” and “property.”        This obviously
follows the grammatical rule.
  8
    That sentence refers to a “plan amendment that changes [1]
the interest rate, [2] the time for determining the interest rate, or
[3] the mortality assumptions used for the purposes described in
paragraph (d)(1) . . . .” Treas. Reg. § 1.417(e)-1(d)(10)(i)
(emphasis added). There is no comma before the italicized
phrase, but it appears that phrase is meant to modify all three
items in the series. For example, paragraph (d)(1) discusses the
present-value calculation, including the “applicable interest rate”
and the “applicable mortality table.”

                                 11
deadline was imposed for plan amendments replacing the PBGC
rate with the Treasury rate. We thus face two questions. First,
did the Commissioner extend that deadline in Rev. Proc. 99-23?
Second, did Rev. Proc. 99-23 meet the statutory and regulatory
requirements for extending the deadline?

       1. Did Revenue Procedure 99-23 extend the deadline
       for interest-rate amendments?

       The Commissioner extended deadlines for certain plan
amendments in three different Revenue Procedures. The first
Revenue Procedure, issued in 1999, listed several kinds of plan
amendments and extended the deadline for making those
amendments. The second and third—issued in 2000 and 2001,
respectively—extended further the 1999 extension. We will
work backward to the 1999 Revenue Procedure—the 2000 and
2001 Revenue Procedures add little to our analysis here, as they
simply extended the 1999 extension.

        The three Revenue Procedures deal with, among other
things, plan amendments following GUST changes. GUST is an
acronym for a list of several laws,9 but what is important here is

  9
   The laws listed in the 1999 Revenue Procedure include the
Uruguay Round Agreements Act, the Uniformed Services
Employment and Reemployment Rights Act of 1994, the Small
Business Job Protection Act of 1996, the Taxpayer Relief Act of
1997, and the Internal Revenue Service Restructuring and
Reform Act of 1998. Rev. Proc. 99-23 § 2.01, 1999-16 I.R.B.

                               12
that GUST includes the Uruguay Round Agreements Act (which
includes the Retirement Protection Act and the Treasury interest
rate). Rev. Proc. 2000-27 § 1.02, 2000-26 I.R.B. 1272.

       In Rev. Proc. 2000-27, the Commissioner extended the
deadline for “all GUST plan amendments, including all those
specifically enumerated in Rev. Proc. 99-23,” to January 1,
2001. Id. §§ 4.01–.02. Revenue Procedure 2001-55 extended
to February 28, 2002, the deadline for “all GUST plan
amendments, including all those plan amendments specifically
enumerated in Rev. Proc. 99-23.” Rev. Proc. 2001-55 § 3.01,
2001-49 I.R.B. 552. Thus, whether Hercules had until February
28, 2002, to adopt its amendment depends on whether its plan
amendment was covered by Rev. Proc. 99-23. We now move to
that inquiry.

       Revenue Procedure 99-23 extended to January 1, 2000,
“the remedial amendment period under § 401(b) of the Code for
amending plans that are qualified under
§ 401(a) . . . for . . . recent changes in the law.” Rev. Proc. 99-
23 § 1.01, 1999-16 I.R.B. 5. The Revenue Procedure noted, in
its Purpose section, that it extended the time allowed for plans
to adopt the Treasury interest rate for purposes of present-value
calculations. See id. § 1.03. And in its Background section, it
mentioned the Retirement Protection Act’s replacing the PBGC
interest rate with the Treasury interest rate. Id. §§ 2.07–.08.

5.

                                13
           Section 3.06 of Rev. Proc. 99-23 is the key. We quote it
in full:

                   Finally, the extension of the remedial
           amendment period also applies to the time for
           adopting amendments of defined benefit plans to
           provide that benefits will be determined in
           accordance with the applicable interest rate rules
           and applicable mortality table rules of
           § 1.417(e)-1(d). Thus, such a plan amendment
           may be adopted at any time up to the last day of
           the extended remedial amendment period,
           provided the amendment is made effective for
           distributions with annuity starting dates occurring
           in plan years beginning after December 31, 1999.
           However, pursuant to the Commissioner’s
           authority in § 1.401(b)-1T(c)(3), if such a plan
           amendment is adopted after the last day of the last
           plan year beginning before January 1, 2000, the
           amendment must provide that, with respect to
           distributions with annuity starting dates that are
           after the last day of that plan year but before the
           date of adoption of the amendment, the
           distribution will be the greater of the amount that
           would be determined under the plan without
           regard to the amendment and the amount
           determined under the plan with regard to the
           amendment.

                                   14
Id. § 3.06.

       In English, section 3.06 says this: This Revenue
Procedure applies to amendments that replace the PBGC interest
rate with the Treasury interest rate. Thus, those amendments
can be made until January 1, 2000, as long as they are made
effective for payments made on or after January 1, 2000. But if
such an amendment is adopted after January 1, 2000, it cannot
take effect retroactively. For the period between January 1,
2000, and the amendment adoption date, the plan must instead
pay participants the greater of either (a) the amount due under
the PBGC rate or (b) the amount due under the Treasury rate.

        As the plain-English translation makes clear, Rev. Proc.
99-23 by its terms applied to the Hercules amendment. (It also
makes clear that Hercules followed the Revenue Procedure’s
anti-retroactivity rules in the amended plan; as noted in footnote
2 above, Hercules gave participants the higher sum resulting
from the PBGC- or Treasury-rate calculations until January
2002.)

       Now we must determine whether Rev. Proc. 99-23 met
the statutory and regulatory requirements for extending plan-
amendment deadlines. If so, Rev. Proc. 99-23 and the
subsequent Revenue Procedures extended the deadline for
adopting the Treasury rate to February 28, 2002—and Hercules’
amendment was adopted before that deadline. We address that
question next.

                               15
      2. Did the Revenue Procedures meet the statutory and
regulatory requirements to extend the deadline?

        Section 401(b) of the Code allows plans to qualify under
§ 401(a) via retroactive10 amendment. The section basically
provides that, if a plan is not effective in a given period, a
retroactive, remedial amendment can make it effective for that
period. See I.R.C. § 401(b). The Code authorizes the Secretary
of the Treasury to set this remedial amendment period.11 See id.

       Accordingly, Treas. Reg. § 1.401(b)-1 further defines the
Secretary’s authority under § 401(b). The general rule is that a
plan that does not satisfy § 401(a)’s requirements on any given
day “shall be considered to have satisfied such requirements on
such date if, on or before the last day of the remedial
amendment period . . . with respect to such disqualifying
provision,” the plan is amended to meet all of those

   10
      To dispel any confusion about section 1’s discussion of
“anti-retroactivity rules” and section 2’s discussion of
retroactivity, we note briefly that the anti-retroactivity rules set
forth in Rev. Proc. 99-23 § 3.06 were simply limits on the
retroactivity of interest-rate amendments. The Commissioner is
empowered to impose limitations on retroactivity under Treas.
Reg. § 1.401(b)-1(c)(3), and he did so in section 3.06.
  11
   A remedial amendment period may also be extended. The
Commissioner has the authority to extend any remedial
amendment period at his discretion. Id. § 1.401(b)-1(f).

                                16
requirements by the end of the remedial amendment period, and
those amendments are made retroactive to the beginning of the
period. Treas. Reg. § 1.401(b)-1(a) (emphasis added). Thus, to
take advantage of a retroactive amendment period, a plan must
amend a “disqualifying provision.”

       In paragraph (b)(3), the Secretary grants the
Commissioner authority to designate a “disqualifying
provision.” This paragraph reads:

             A [disqualifying provision is a] plan
      provision designated by the Commissioner, at the
      Commissioner’s discretion, as a disqualifying
      provision that either—

                    (i) Results in the failure of
             the plan to satisfy the qualification
             requirements of the Internal
             Revenue Code by reason of a
             change in those requirements; or

                    (ii) Is integral to a
             qualification requirement of the
             Internal Revenue Code that has
             been changed.

                              17
Id. § 1.401(b)-1(b)(3).12

       Stepnowski concedes that section 3.06 of Rev. Proc. 99-
23 complies with the Commissioner’s discretionary designation
requirements. His argument is therefore that the Commissioner
could not extend the remedial amendment period for interest-
rate amendments because Hercules’ plan paid larger payments
before it was amended. That is, Hercules did not need to amend
the plan to satisfy the Retirement Protection Act because it was
already paying more than the Act’s required minimum. The
Hercules plan was qualified under § 401(a) because it used the
PBGC interest rate, Stepnowski argues, so this more favorable
interest rate to him could not be a “disqualifying provision.”

       Stepnowski’s argument fails because paragraph (b)(3) is
written in the disjunctive. A “disqualifying provision” need not
cause a plan to fail under § 401—although that is one definition
of a “disqualifying provision” under Treas. Reg. § 1.401(b)-
1(b)(3)(i). It can also be something that is simply “integral to a
qualification requirement of the Internal Revenue Code that has
been changed.” Id. § 1.401(b)-1(b)(3)(ii). That is the issue
before us; we address it in three brief points.

   12
      The Commissioner can only make such a designation in
“revenue rulings, notices, and other guidance published in the
Internal Revenue Bulletin.” Treas. Reg. § 1.401(b)-1(c)(2). The
three Revenue Procedures at issue were published in the Internal
Revenue Bulletin.

                               18
       First, the present-value provision is a “qualification
requirement of the Internal Revenue Code.” Section 401(a)
describes the qualification requirements and refers to § 417 for
provisions under which plan participants may choose lump-sum
payments. I.R.C. § 401(a)(11)(F). Section 417(e)(3) in turn
requires plans to use a minimum present-value calculation for
such payments.

       Second, the interest-rate provision is “integral” to the
present-value provision. Section 417(e)(3)(A)(i) sets minimum
requirements for present-value calculations, stating that “the
present value shall not be less than the present value calculated
by using the applicable mortality table and the applicable
interest rate.” And § 417(e)(3)(A)(ii)(II) defines the “applicable
interest rate.” What is integral is something that is “essential to
completeness” or is “serving to form a whole.” Webster’s Third
New International Dictionary 1173 (Philip Babcock Gove ed.,
1971). The “applicable interest rate” is essential to the present-
value calculation and therefore, by definition, integral.

       Third, the interest-rate provision “has been changed.”
Congress replaced the PBGC rate in 1994, making the 30-year
Treasury interest rate the “applicable interest rate.” Retirement
Protection Act § 767(a)(2), 108 Stat. at 5038.

    The only remaining question is whether the
Commissioner implicitly designated the interest-rate provision

                                19
as a disqualifying provision in Rev. Proc. 99-23.13 We hold that
he did for three reasons.

       First, the Commissioner cannot extend a remedial
amendment period for something that he did not designate as a
disqualifying provision. See Treas. Reg. § 1.401(b)-1(a)
(discussing a “remedial amendment period . . . with respect to
[a] disqualifying provision”).      Thus, the fact that the
Commissioner extended the remedial amendment period for
interest-rate amendments implies that he designated interest-rate
provisions as “disqualifying provisions.”

       Second, the Commissioner expressly referred to his
designation authority in requiring that the Treasury rate could
not be imposed retroactively if adopted after January 1, 2000.
The Revenue Procedure referred to “the Commissioner’s
authority in § 1.401(b)-1T(c)(3)” in setting out this requirement.
Rev. Proc. 99-23 § 3.06. Section 1.401(b)-1T(c)(3) in the
temporary regulations—now found in Treas. Reg. § 1.401(b)-
1(c)(3)—allowed the Commissioner to impose additional rules
on provisions designated as “disqualifying provisions.”

  13
     Although Stepnowski points to section 4 of Rev. Proc. 99-
23 as an example of an explicit designation of an integral
provision, see Rev. Proc. 99-23 § 4 (“Designation of plan
provisions integral to § 415(e) as disqualifying provisions”
(capitalization altered)), the Commissioner can designate
“disqualifying provisions” implicitly as well—and did so here
in section 3.06.

                               20
Remedial Amendment Period, 62 Fed. Reg. 41272, 41274 (Aug.
1, 1997) (codified at Treas. Reg. § 1.401(b)-1(c)(3)).

       Third, and most importantly, the Commissioner in the
2000 Revenue Procedure recognized that all plan provisions
“integral to a qualification requirement changed by GUST are
disqualifying provisions under § 1.401(b)-1(b) of the
regulations.” Rev. Proc. 2000-27 § 4.02. Because the GUST
plan amendments included the amendments “specifically
enumerated in Rev. Proc. 99-23,” id., Rev. Proc. 99-23
designated the interest-rate provision as a “disqualifying
provision.” Therefore, even if Rev. Proc. 99-23 did not
explicitly designate the interest-rate provision as a
“disqualifying provision,” Rev. Proc. 2000-27 did, so Hercules’
amendment still fell within the deadline extended by the
Commissioner.

        The Commissioner—by expressly referring to his
designation powers and by extending a remedial amendment
period for interest-rate amendments—designated the interest-
rate plan provision as a “disqualifying provision” under Treas.
Reg. § 1.401(b)-1(b)(3) and I.R.C. § 401(b).

                           *****

       We hold that the Commissioner extended—until
February 28, 2002—the deadline for plans to amend their
present-value calculations to switch from using the PBGC rate

                              21
to using the 30-year Treasury rate. Because Hercules’ plan was
amended to adopt the Treasury rate before February 28, 2002,
its plan amendment was not a cutback prohibited by § 411(d)(6).
We therefore affirm the Tax Court’s decision.

                              22