Bulletin No. 2005-38September 19, 2005

HIGHLIGHTSOF THIS ISSUEThese synopses are intended only as aids to the reader inidentifying the subject matter covered. They may not berelied upon as authoritative interpretations.

INCOME TAX

Rev. Rul. 2005–61, page 538.Fringe benefits aircraft valuation formula. The StandardIndustry Fare Level (SIFL) cents-per-mile rates and terminalcharges in effect for the second half of 2005 are set forth forpurposes of determining the value of noncommercial flightson employer-provided aircraft under section 1.61–21(g) of theregulations.

Rev. Rul. 2005–62, page 557.Interest rates; underpayments and overpayments. Therate of interest determined under section 6621 of the Code forthe calendar quarter beginning October 1, 2005, will be 7 per-cent for overpayments (6 percent in the case of a corporation),7 percent for underpayments, and 9 percent for large corpo-rate underpayments. The rate of interest paid on the portion ofa corporate overpayment exceeding $10,000 will be 4.5 per-cent.

Rev. Proc. 2005–65, page 564.Specifications are set forth for the private printing of paper andlaser-printed substitutes for tax year 2005 Form W-2, Wageand Tax Statement, and Form W-3, Transmittal of Wage andTax Statements. Rev. Proc. 2004–54 superseded.

EMPLOYEE PLANS

T.D. 9219, page 538.Final regulations under section 411(d)(6) of the Code provideguidance relating to the anti-cutback rules and the notificationrequirements under section 4980F.

REG–156518–04, page 582.Proposed regulations under section 411(d)(6) of the Code pro-vide guidance relating to the anti-cutback rules. A public hear-ing is scheduled for December 6, 2005.

EXEMPT ORGANIZATIONS

Announcement 2005–65, page 587.A list is provided of organizations now classified as private foun-dations.

EMPLOYMENT TAX

Rev. Proc. 2005–65, page 564.Specifications are set forth for the private printing of paper andlaser-printed substitutes for tax year 2005 Form W-2, Wageand Tax Statement, and Form W-3, Transmittal of Wage andTax Statements. Rev. Proc. 2004–54 superseded.

Finding Lists begin on page ii.

The IRS MissionProvide America’s taxpayers top quality service by helpingthem understand and meet their tax responsibilities and by

applying the tax law with integrity and fairness to all.

IntroductionThe Internal Revenue Bulletin is the authoritative instrument ofthe Commissioner of Internal Revenue for announcing officialrulings and procedures of the Internal Revenue Service and forpublishing Treasury Decisions, Executive Orders, Tax Conven-tions, legislation, court decisions, and other items of generalinterest. It is published weekly and may be obtained from theSuperintendent of Documents on a subscription basis. Bulletincontents are compiled semiannually into Cumulative Bulletins,which are sold on a single-copy basis.

It is the policy of the Service to publish in the Bulletin all sub-stantive rulings necessary to promote a uniform application ofthe tax laws, including all rulings that supersede, revoke, mod-ify, or amend any of those previously published in the Bulletin.All published rulings apply retroactively unless otherwise indi-cated. Procedures relating solely to matters of internal man-agement are not published; however, statements of internalpractices and procedures that affect the rights and duties oftaxpayers are published.

Revenue rulings represent the conclusions of the Service on theapplication of the law to the pivotal facts stated in the revenueruling. In those based on positions taken in rulings to taxpayersor technical advice to Service field offices, identifying detailsand information of a confidential nature are deleted to preventunwarranted invasions of privacy and to comply with statutoryrequirements.

Rulings and procedures reported in the Bulletin do not have theforce and effect of Treasury Department Regulations, but theymay be used as precedents. Unpublished rulings will not berelied on, used, or cited as precedents by Service personnel inthe disposition of other cases. In applying published rulings andprocedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,and Service personnel and others concerned are cautionedagainst reaching the same conclusions in other cases unlessthe facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.This part includes rulings and decisions based on provisions ofthe Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.This part is divided into two subparts as follows: Subpart A,Tax Conventions and Other Related Items, and Subpart B, Leg-islation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.To the extent practicable, pertinent cross references to thesesubjects are contained in the other Parts and Subparts. Alsoincluded in this part are Bank Secrecy Act Administrative Rul-ings. Bank Secrecy Act Administrative Rulings are issued bythe Department of the Treasury’s Office of the Assistant Sec-retary (Enforcement).

Part IV.—Items of General Interest.This part includes notices of proposed rulemakings, disbar-ment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative indexfor the matters published during the preceding months. Thesemonthly indexes are cumulated on a semiannual basis, and arepublished in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

September 19, 2005 2005–38 I.R.B.

Part I. Rulings and Decisions Under the Internal Revenue Codeof 1986Section 61.—Gross IncomeDefined

26 CFR 1.61–21: Taxation of fringe benefits.

Fringe benefits aircraft valuation for-mula. The Standard Industry Fare Level(SIFL) cents-per-mile rates and terminalcharges in effect for the second half of2005 are set forth for purposes of deter-mining the value of noncommercial flightson employer-provided aircraft under sec-tion 1.61–21(g) of the regulations.

Rev. Rul. 2005–61

For purposes of the taxation of fringebenefits under section 61 of the Inter-nal Revenue Code, section 1.61–21(g) ofthe Income Tax Regulations provides arule for valuing noncommercial flightson employer-provided aircraft. Section1.61–21(g)(5) provides an aircraft valua-tion formula to determine the value of suchflights. The value of a flight is determinedunder the base aircraft valuation formula(also known as the Standard Industry Fare

Level formula or SIFL) by multiplyingthe SIFL cents-per-mile rates applicablefor the period during which the flight wastaken by the appropriate aircraft multipleprovided in section 1.61–21(g)(7) and thenadding the applicable terminal charge. TheSIFL cents-per-mile rates in the formulaand the terminal charge are calculated bythe Department of Transportation and arereviewed semi-annually.

The following chart sets forth the termi-nal charges and SIFL mileage rates:

Period During Whichthe Flight Is Taken

TerminalCharge

SIFL MileageRates

7/1/05 – 12/31/05 $35.21 Up to 500 miles= $.1926 per mile

501–1500 miles= $.1468 per mile

Over 1500 miles= $.1412 per mile

DRAFTING INFORMATION

The principal author of this revenueruling is Kathleen Edmondson of theOffice of Division Counsel/AssociateChief Counsel (Tax Exempt and Govern-ment Entities). For further informationregarding this revenue ruling, contactMs. Edmondson at (202) 622–0047 (not atoll-free call).

Section 411.—MinimumVesting Standards26 CFR 1.411(d)–3: Section 411(d)(6) protected ben-efits.

T.D. 9219

DEPARTMENT OFTHE TREASURYInternal Revenue Service26 CFR Parts 1 and 54

Section 411(d)(6) ProtectedBenefits

AGENCY: Internal Revenue Service(IRS), Treasury.

ACTION: Final regulation.

SUMMARY: This document contains finalregulations providing guidance regardingthe anti-cutback rules of section 411(d)(6)of the Internal Revenue Code, which gen-erally protect accrued benefits, early re-tirement benefits, retirement-type subsi-dies, and optional forms of benefit un-der qualified retirement plans. The regu-lations address the limited circumstancesunder which a qualified retirement planis permitted to be amended to eliminateor reduce early retirement benefits, retire-ment-type subsidies, or optional forms ofbenefit. The final regulations also pro-vide related guidance concerning the no-tice requirements of section 4980F. Thesefinal regulations generally affect sponsorsof, and participants in, qualified retirementplans.

DATES: Effective date: These regulationsare effective on August 12, 2005.

Applicability date: For dates of ap-plicability of these regulations, see§1.411(d)–3(j) of these regulations.

FOR FURTHER INFORMATIONCONTACT: Pamela R. Kinard at (202)622–6060 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

This document contains amendmentsto 26 CFR parts 1 and 54 under sec-tions 411(d)(6) and 4980F of the InternalRevenue Code (Code). This TreasuryDecision amends §1.411(d)–3 of the Trea-sury regulations to reflect changes tosection 411(d)(6) made by the EconomicGrowth and Tax Relief ReconciliationAct of 2001, Public Law 107–16 (155Stat. 38) (EGTRRA). In addition, thisTreasury Decision includes rules relatingto changes to section 411(d)(6) made bythe Retirement Equity Act of 1984, Pub-lic Law 98–397 (98 Stat. 1426) (REA)and makes conforming amendments to§1.411(d)–4. This Treasury Decisionalso amends §54.4980F–1(b), relatingto the notice requirement for certain planamendments that eliminate or significantlyreduce early retirement benefits or retire-ment-type subsidies.

2005–38 I.R.B. 538 September 19, 2005

Section 401(a)(7) provides that a trustdoes not constitute a qualified trust unlessits related plan satisfies the requirementsof section 411 (relating to minimum vest-ing standards). Section 411(d)(6)(A) pro-vides that a plan is treated as not satisfyingthe requirements of section 411 if the ac-crued benefit of a participant is decreasedby an amendment of the plan, other than anamendment described in section 412(c)(8)of the Code or section 4281 of the Em-ployee Retirement Income Security Act of1974 (ERISA), as amended.

Section 411(a)(7)(A) defines the termaccrued benefit. For a defined contribu-tion plan, a participant’s accrued benefitis the balance of the participant’s account.For a defined benefit plan, a participant’saccrued benefit is the participant’s benefitunder the terms of the plan expressed inthe form of an annual benefit commencingat normal retirement age. Under section411(c)(3), if a participant’s accrued benefitunder a defined benefit plan is to be deter-mined as an amount other than an annualbenefit commencing at normal retirementage, the participant’s accrued benefit is theactuarial equivalent of such benefit.

Section 301(a) of REA amended Codesection 411(d)(6) to add subparagraph(B), which provides that a plan amend-ment that has the effect of eliminating orreducing an early retirement benefit or aretirement-type subsidy, or eliminating anoptional form of benefit, with respect tobenefits attributable to service before theamendment is treated as impermissiblyreducing accrued benefits. For a retire-ment-type subsidy, this protection appliesonly with respect to an employee whosatisfies the preamendment conditionsfor the subsidy (either before or after theamendment). Section 411(d)(6)(B) alsoauthorizes the Secretary of the Treasury toprovide, through regulations, that section411(d)(6)(B) does not apply to any planamendment that eliminates optional formsof benefit (other than a plan amendmentthat has the effect of eliminating or re-ducing an early retirement benefit or aretirement-type subsidy).

On July 11, 1988, final regulations(T.D. 8212, 1988–2 C.B. 83) under section411(d)(6) were published in the FederalRegister (53 FR 26050) (the 1988 regu-lations). Under those regulations, section411(d)(6) protects certain benefits, to theextent they have accrued, so that such

benefits cannot be reduced or eliminatedby plan amendment, except to the extentpermitted by regulations (see §1.411(d)–4,Q&A–1(a)). Section 1.411(d)–4 speci-fies circumstances under which a planis permitted to be amended to reduce oreliminate an optional form of benefit.

Section 645(b)(1) of EGTRRAamended section 411(d)(6)(B) of the Codeto direct the Secretary to issue regulationsproviding that the requirements of section411(d)(6)(B) do not apply to any amend-ment that reduces or eliminates earlyretirement benefits or retirement-typesubsidies that create significant burdensor complexities for the plan and planparticipants unless such amendment ad-versely affects the rights of any participantin a more than de minimis manner. Asamended by EGTRRA, section 4980F ofthe Code and section 204(h) of ERISAeach require that a plan administrator givenotice of a plan amendment to affectedplan participants and beneficiaries whenthe plan amendment provides for a signif-icant reduction in the rate of future benefitaccrual or the elimination or significantreduction of an early retirement benefit ora retirement-type subsidy.

Section 204(g) of ERISA contains par-allel rules to Code section 411(d)(6), in-cluding a similar directive to the Secretaryof the Treasury to issue regulations pro-viding that section 204(g) does not applyto any amendment that reduces or elim-inates early retirement benefits or retire-ment-type subsidies that create significantburdens or complexities for the plan andplan participants unless such amendmentadversely affects the rights of any partic-ipant in a more than de minimis manner.Under section 101 of Reorganization PlanNo. 4 of 1978 (43 FR 47713) and sec-tion 204(g) of ERISA, the Secretary of theTreasury has interpretive jurisdiction overthe subject matter addressed in these reg-ulations for purposes of ERISA, as wellas the Code. Thus, these final regula-tions issued under sections 411(d)(6) of theCode apply as well for purposes of section204(g) of ERISA.

On March 24, 2004, proposed regu-lations (REG–128309–03, 2004–1 C.B.800) under sections 411(d)(6) and 4980Fof the Code were published in the Fed-eral Register (69 FR 13769). On June24, 2004, the IRS held a public hear-ing on the proposed regulations. Written

comments responding to the notice ofproposed rulemaking were also received.After consideration of all the comments,the proposed regulations are adopted, asamended by this Treasury Decision. Therevisions are discussed below.

Explanation of Provisions

I. Overview

These regulations respond to theEGTRRA directive for purposes of bothsection 411(d)(6) of the Code and sec-tion 204(g) of ERISA by specifying thecircumstances under which a plan maybe amended to reduce or eliminate earlyretirement benefits, retirement-type subsi-dies, and optional forms of benefit (section411(d)(6)(B) protected benefits). The cir-cumstances specified in the regulationsare designed to implement the statutorydirective to permit reduction or elimi-nation of section 411(d)(6)(B) protectedbenefits that create significant burdens orcomplexities for the plan and its partici-pants, but only if the elimination does notadversely affect the rights of any partic-ipant in a more than de minimis manner.These provisions relating to the permis-sible elimination of benefits protected bysection 411(d)(6)(B) are in addition to therules permitting a plan to be amended toeliminate optional forms of benefit under§1.411(d)–4.

These regulations provide 2 permittedmethods for eliminating or reducing sec-tion 411(d)(6)(B) protected benefits un-der the EGTRRA directive: eliminationof redundant optional forms of benefit andelimination of noncore optional forms ofbenefits where core options are offered.Either of these 2 alternative methods canbe applied with respect to any optionalform of benefit. A plan sponsor may deter-mine that one method of elimination worksfor some plan participants or some op-tional forms of benefit, but not for the re-maining plan participants or other optionalforms of benefit. However, a plan mustsatisfy all of the requirements of the appli-cable method with respect to any optionalform of benefit being eliminated.

These final regulations also includegeneral guidance on section 411(d)(6),including the meaning of the termsused therein, the scope of the section411(d)(6)(A) protection against plan

September 19, 2005 539 2005–38 I.R.B.

amendments decreasing a participant’saccrued benefit, and the scope of section411(d)(6)(B) protection for early retire-ment benefits, retirement-type subsidies,and optional forms of benefit. This Trea-sury Decision also makes conformingamendments to §1.411(d)–4, includingamendments to the definition of optionalform of benefit and the multiple amend-ment rule described in this preamble (un-der the heading Multiple amendment rule).

This Treasury Decision completelyreplaces the provisions in former§1.411(d)–3. However, the rules in for-mer §1.411(d)–3 generally have beencarried over to this Treasury Decision,except to the extent needed to reflectstatutory changes (such as the eliminationof class-year vesting and the enactment ofsection 411(d)(6)(B)).

II. Scope of Section 411(d)(6) Protections

A. General rules under section 411(d)(6)

These final regulations take into ac-count and respond to judicial decisionsinterpreting section 411(d)(6) (or itsparallel provision at section 204(g) ofERISA).1 For example, the regulationsprovide that section 411(d)(6) protectionapplies to a participant’s entire accruedbenefit as of the applicable amendmentdate, without regard to whether the entireaccrued benefit was accrued before a par-ticipant’s severance from employment, orwhether some portion of the accrued ben-efit was the result of an increase pursuantto a plan amendment adopted after the par-ticipant’s severance from employment.2

The regulations generally retain therules from former §1.411(d)–3. Thus, forpurposes of determining whether or notany participant’s accrued benefit is de-creased, all plan amendments affecting,directly or indirectly, the computation ofaccrued benefits are taken into accountand, in determining whether a reductionhas occurred, all plan amendments withthe same applicable amendment date (the

later of the adoption date or the effec-tive date of the amendment) are treatedas one amendment. The regulations alsoprovide that these rules apply to section411(d)(6)(B) protected benefits. Thus, forexample, if there are 2 amendments withthe same applicable amendment date, oneof which increases accrued benefits andthe other of which decreases the early re-tirement factors that are used to determinethe early retirement annuity, the 2 amend-ments are treated as one amendment andonly violate section 411(d)(6) if, after the2 amendments, the net dollar amount ofany early retirement annuity, with respectto the accrued benefit of any participantas of the applicable amendment date, islower on that applicable amendment datethan it would have been without the 2amendments.3

B. Definitions of section 411(d)(6)protected benefits

The legislative history of REA providesthat:

[T]he term ‘retirement-type subsidy’ isto be defined by Treasury regulations.The committee intends that under theseregulations, a subsidy that continuesafter retirement is generally to be con-sidered a retirement-type subsidy. Thecommittee expects, however, that aqualified disability benefit, a medicalbenefit, a social security supplement, adeath benefit (including life insurance),or a plant shutdown benefit (that doesnot continue after retirement age) willnot be considered a retirement-typesubsidy. The committee expects thatTreasury regulations will prevent therecharacterization of retirement-typebenefits as benefits that are not pro-tected [under section 411(d)(6)].4

These final regulations reflect the rulesin the 1988 regulations (see §1.411(d)–4,Q&A–1(d)) that ancillary benefits andother rights or features are not protectedunder section 411(d)(6). In addition,taking the REA legislative history into

account, these regulations define theterms early retirement benefit, retire-ment-type benefit, and retirement-typesubsidy. These definitions differ in severalrespects from the proposed regulations.

The definition of the term ancil-lary benefit in these regulations reflectschanges from the proposed regulationsregarding death benefits. Because the ac-count balance is the accrued benefit in adefined contribution plan, the payment ofthe account balance upon the death of aparticipant is the payment of the accruedbenefit rather than an ancillary benefit.Therefore, in contrast to the proposedregulations, the final regulations do notcategorize a right to a death benefit undera defined contribution plan as an ancillarybenefit, and this right is protected undersection 411(d)(6). For a defined bene-fit plan, these regulations provide that adeath benefit that is not part of an optionalform of benefit is an ancillary benefit and,therefore, is not protected under section411(d)(6), even if paid after retirement.The regulations also clarify when a deathbenefit under a defined benefit plan is partof an optional form of benefit. The defini-tion of optional form of benefit is defined in§1.411(d)–3(g)(6)(ii) of these final regu-lations and in §1.411(d)–4, Q&A–1(b)(1),which has been revised by this TreasuryDecision to coordinate with the definitionof optional form of benefit in these finalregulations.

The regulations also include changes tothe definitions of ancillary benefit and re-tirement-type benefit, relating to benefitsthat are not permitted to be in a qual-ified plan. These changes are relevantfor purposes of applying section 204(g)of ERISA (the parallel rule to section411(d)(6)), which applies to both qualifiedand nonqualified plans. The final regu-lations provide that, in addition to socialsecurity supplements, disability benefits,life insurance benefits, medical benefitsunder section 401(h), and certain deathbenefits, the only other ancillary bene-

1 See Bellas v. CBS, Inc., 221 F.3d 517 (3rd

Cir. 2000), cert. denied, 531 U.S. 1104 (2001) (holding early retirement benefit that is more valuable than actuarially reduced normal retirementbenefit and that is payable on occurrence of unpredictable contingent event is retirement-type subsidy, and therefore is protected under section 204(g)), Board of Trustees of the Sheet MetalWorkers’ National Pension Fund v. C.I.R., 318 F.3d 599 (4

thCir. 2003) (stating provision for automatic cost-of-living adjustments granted by plan amendment is not accrued benefit for

participants who retired before effective date of amendment and, thus, holding subsequent plan amendment eliminating future adjustments did not violate anti-cutback rule of section 411(d)(6)),and Michael v. Riverside Cement, 266 F.3d 1023 (9

thCir. 2001) (holding plan amendment providing for actuarial offset of early retirement benefits previously received by rehire upon

subsequent retirement violates ERISA section 204(g), even though net effect of amendment is increase in retirement benefit of participant).

2 This is contrary to the analysis in Board of Trustees of the Sheet Metal Workers’ National Pension Fund v. C.I.R..

3 This is contrary to the analysis in Michael v. Riverside Cement.

4 S. Rep. 98–575, at 30 (1984).

2005–38 I.R.B. 540 September 19, 2005

fits are plant shutdown benefits and othersimilar benefits that do not continue pastretirement age, do not affect the paymentof the accrued benefit, and are permitted tobe in a qualified pension plan. These regu-lations also provide that a retirement-typebenefit is either the payment of a distribu-tion alternative with respect to an accruedbenefit or the payment of any other benefitunder a defined benefit plan (includinga QSUPP as defined in §1.401(a)(4)–12)that is permitted to be in a qualified pen-sion plan, continues after retirement, andis not an ancillary benefit.

These regulations include a num-ber of clarifications regarding section411(d)(6)(B) protected benefits that wereincluded in the proposed regulations withminor modifications. The regulations clar-ify that if, after a plan amendment, there isanother optional form of benefit availableto a participant under the plan that is ofinherently equal or greater value, the planamendment is not treated as eliminatingan optional form of benefit, or eliminatingor reducing an early retirement benefit ora retirement-type subsidy. For example,a change in the method of calculating ajoint and survivor annuity from using a90% adjustment factor on account of thesurvivorship payment at particular agesfor a participant and a spouse to using a91% adjustment factor at the same ages istreated as not eliminating an optional formof benefit.

C. Multiple amendment rule

Under the proposed regulations, a planamendment would violate the require-ments of section 411(d)(6) if it is oneof a series of plan amendments made atdifferent times that, when taken together,have the effect of reducing or eliminat-ing a section 411(d)(6) protected benefitin a manner that would be prohibitedunder section 411(d)(6) if accomplishedthrough a single amendment. The 1988regulations contained a similar rule underwhich a plan amendment that modifiedan optional form of benefit with respectto benefits already accrued was evalu-ated in light of previous amendments (see§1.411(d)–4, Q&A–2(c), as in effect priorto amendment by these regulations).

Commentators raised concerns aboutthe multiple amendment rule in the pro-posed regulations, including its complex-ity and the uncertainty as to when the rulewould apply. In response to these com-ments, this multiple amendment rule hasbeen revised to add an objective rule thatgenerally only combines plan amendmentsadopted within a 3-year period. The finalregulations also retain an application ofthe multiple amendment rule from the pro-posed regulations relating to restrictionsagainst creating burdens or complexities.Under this rule, if a plan is amended toadd a retirement-type subsidy in order toeliminate another retirement-type subsidywithin 3 years, the plan amendment elim-inating the retirement-type subsidy willnot be treated as reducing or eliminatingburdens and complexities for the plan andits participants, even if the elimination ofthe subsidy would not adversely affect therights of any plan participant in a morethan de minimis manner.

These final regulations also makea conforming change to §1.411(d)–4,Q&A–2(c), by replacing the serial amend-ment rule under those regulations with arevised version of the multiple amendmentrule. These regulations do not modify therule in §1.411(d)–4, Q&A–1(c)(1), whichprovides that if an employer establishesa pattern of repeated plan amendmentsproviding for similar benefits in similarsituations for substantially consecutive,limited periods of time, then those similarbenefits will be treated as provided underthe terms of the plan, without regard to thelimited period of time, to the extent neces-sary to carry out the purposes of sections411(d)(6) and, where applicable, the defi-nitely determinable requirement of section401(a), including section 401(a)(25).

D. Application of section 411(d)(6)to certain amendments eliminatingimpermissible benefits

Commentators suggested that the finalregulations clarify that a plan is permit-ted under section 411(d)(6) to eliminatean optional form of benefit that is incon-sistent with the plan qualification require-ments of section 401(a) (e.g., the require-ments of section 401(a)(9)). In general,section 411(d)(6) does not permit the elim-

ination or reduction of a section 411(d)(6)protected benefit solely because that ben-efit violates the plan qualification require-ments. However, in the past, the IRS hasexercised its authority to issue guidancethat, in certain situations, permit certainplan amendments that eliminate or reducecertain optional forms of benefit that vi-olate the plan qualification requirements.For example, §1.401(a)(9)–8, Q&A–12,provides that a plan will not fail to satisfysection 411(d)(6) merely because the planis amended to eliminate the availability ofan optional form of benefit to the extentthat the optional form does not satisfy sec-tion 401(a)(9).5

III. Elimination of Benefits of De MinimisValue Under EGTRRA

A. Elimination of redundant optionalforms of benefit

These regulations generally retain therule from the proposed regulations that aplan is permitted to be amended to elimi-nate an optional form of benefit for a par-ticipant with respect to benefits accruedbefore the applicable amendment date ifthe optional form of benefit is redundantwith respect to a retained optional form ofbenefit and certain conditions are satisfied.An optional form of benefit is consideredredundant with respect to a retained op-tional form of benefit if the retained op-tional form of benefit is in the same familyof optional forms of benefit as the optionalform of benefit being eliminated and theparticipant’s rights with respect to the re-tained optional form of benefit are not sub-ject to materially greater restrictions thanthose that applied to the optional form ofbenefit being eliminated.

These regulations also contain new ter-minology to facilitate the application ofcertain rules. Various rules in these fi-nal regulations use the term annuity com-mencement date instead of the term an-nuity starting date, thereby accommodat-ing the elimination of an optional form ofbenefit that includes a retroactive annuitystarting date. The final regulations alsodefine the term generalized optional form,which means a group of optional formsof benefit that are identical except for dif-ferences due to the actuarial factors that

5 See also §1.401(a)(9)–1, Q&A–3, providing that, notwithstanding any other plan provision, a plan is not permitted to distribute benefits under any optional form of benefit that does notsatisfy section 401(a)(9).

September 19, 2005 541 2005–38 I.R.B.

are used to determine the amount of thedistributions under those optional formsof benefit and the annuity starting dates.The concept of a generalized optional formis used in several places in these regula-tions, including the redundancy rule andthe rules concerning burdensome and deminimis benefits.

Under the proposed regulations, amongthe conditions for eliminating a section411(d)(6)(B) protected benefit under theredundancy rule is that the plan amend-ment not apply to an optional form of ben-efit with an annuity starting date that is ear-lier than 90 days after the date the amend-ment is adopted. This 90-day waiting pe-riod is based on a rule relating to the tim-ing for the written explanation of a quali-fied joint and survivor annuity under sec-tion 417(a)(3). Under that rule, the ex-planation cannot be provided more than90 days before the annuity starting date.See §1.417(e)–1(b)(3)(ii). A commenta-tor suggested that the regulations be re-vised to increase the waiting period be-fore the elimination of a redundant op-tional form of benefit from 90 days afterthe amendment is adopted to 180 days af-ter the amendment is adopted. The com-mentator reasoned that this increase wouldgive participants more time to adjust to theelimination of the optional form of bene-fit and, thus, participants would have moretime to select from among the preamend-ment optional forms of benefit. The com-mentator also noted that proposed legis-lation had been introduced that would in-crease the number of days before the an-nuity starting date that a QJSA explana-tion can be provided (the maximum QJSAexplanation period) from 90 days to 180days.

In light of this comment, the final reg-ulations explicitly link the waiting periodbefore the elimination of a redundant op-tional form of benefit with the maximumQJSA explanation period, which is cur-rently a 90-day period. Thus, these reg-ulations provide that, for purposes of theredundancy rule, a plan amendment can-not be applicable with respect to an op-tional form of benefit with an annuity com-mencement date for which a written expla-nation relating to a QJSA would have sat-isfied the timing requirements of section417(a)(3) had it been provided on or beforethe date that the amendment is adopted.This ensures that no participant will re-

ceive a QJSA explanation describing anoptional form of benefit which could beeliminated before the election has beenmade. The waiting period before the elim-ination of a redundant optional form ofbenefit under these final regulations wouldchange automatically if, at any future date,the maximum QJSA explanation periodwere to be altered.

B. Permissible elimination of noncoreoptional forms of benefit where coreoptions are offered

The final regulations retain the rulefrom the proposed regulations under whicha plan is permitted to be amended to elim-inate an optional form of benefit for planparticipants with respect to benefits ac-crued before the applicable amendmentdate if, after the amendment, the plan of-fers a designated set of core options toplan participants with respect to benefitsaccrued both before and after the amend-ment. The core options are defined asa straight life annuity, a 75% joint andcontingent annuity, a 10-year term certainand life annuity, and the most valuableoption for a participant with a short lifeexpectancy. As under the proposed regu-lations, the final regulations do not permita plan amendment to apply to optionalforms of benefit with annuity commence-ment dates that are earlier than 4 yearsafter the date the amendment is adopted.In addition, the final regulations retainthe rule that a plan may not be amendedto eliminate an optional form of benefitthat includes a single-sum distribution thatapplies with respect to at least 25% of aparticipant’s accrued benefit as of the datethe optional form of benefit is eliminated.

Several commentators suggested thatthe 75% joint and contingent annuity coreoption be replaced with a 50% joint andcontingent annuity core option. One com-mentator argued that if the 50% joint andcontingent annuity option is not availableto participants, the higher actuarial chargeassociated with the 75% joint and con-tingent annuity option might discourageparticipants from electing any joint andcontingent annuity option. Other com-mentators pointed out that §1.411(d)–4,Q&A–2(b)(2)(ii), allows a plan that pro-vides a range of 3 or more actuariallyequivalent joint and survivor annuity op-tions to be amended to eliminate any

of such options, other than the optionswith the largest and smallest optional sur-vivor payment percentages (the bookendsrule) and argued that the 75% joint andcontingent annuity core option rule wouldrequire plans to add back the 75% joint andcontingent annuity option that was elimi-nated under the bookends rule. In light ofthese comments and to accommodate thebookends rule, the final regulations retainthe 75% joint and contingent annuity as acore option, but provide a special rule thata plan is permitted to treat both the 50%and 100% joint and contingent annuityoptions as core options for purposes of thecore options rule (in lieu of offering a 75%joint and contingent annuity) if the planotherwise satisfies the requirements of thecore options rule.

As stated above, these regulations re-tain in the list of core options the mostvaluable option for a participant with ashort life expectancy. This core optionis defined as the optional form of ben-efit that is reasonably expected to resultin payments that have the largest actu-arial present value in the case of a par-ticipant who dies shortly after the annu-ity starting date. Like the proposed reg-ulations, these regulations provide a safeharbor method for determining which op-tional form of benefit under the plan isthe most valuable option for a participantwith a short life expectancy. Under thissafe harbor method, a plan is permitted totreat a single-sum distribution option withan actuarial present value that is not lessthan the actuarial present value of any op-tional form of benefit being eliminated asthe most valuable option for a participantwith a short life expectancy. If a plan doesnot offer such a single-sum distribution op-tion, the plan is permitted to treat a jointand contingent annuity as the most valu-able option for a participant with a shortlife expectancy if the continuation percent-age under the amendment is at least 75%and is at least as great as the highest con-tinuation percentage available before theamendment. In the event a plan has neithera single-sum distribution option nor a jointand contingent annuity with a continuationpercentage of at least 75%, the plan is per-mitted to treat a term certain and life an-nuity with a term certain period of at least15 years as the most valuable option for aparticipant with a short life expectancy.

2005–38 I.R.B. 542 September 19, 2005

Similar rules were in the proposed regu-lations, and a commentator argued that therules would overprotect single-sum distri-bution options by providing 2 levels ofprotection: first, by not treating an amend-ment as satisfying the core options rule if iteliminates an optional form of benefit thatincludes a single-sum distribution that ap-plies with respect to at least 25% of the par-ticipant’s accrued benefit as of the date theoptional form of benefit is eliminated; and,second, by providing that a plan is permit-ted to treat a single-sum distribution optionwith an actuarial present value that is notless than the actuarial present value of anyoptional form of benefit eliminated by theplan amendment as the most valuable op-tion for a participant with a short life ex-pectancy. This comment is based on theassumption that a single-sum distributionoption will always be the most valuableoption for a participant with a short lifeexpectancy. However, as illustrated in anexample in these regulations, a single-sumoption is not always the most valuable op-tion for a participant with a short life ex-pectancy, e.g., where the single-sum distri-bution does not take into account an earlyretirement subsidy available in another op-tional form of benefit (see §1.411(d)–3(h),Example 4). Accordingly, the final regula-tions retain the separate protection for sin-gle sum-distributions and the most valu-able option for a participant with a shortlife expectancy. However, the final regu-lations clarify that the safe harbor hierar-chy method for determining the most valu-able option for a participant with a shortlife expectancy is available only if the sin-gle-sum distribution, joint and contingentannuity, or term certain and life annuity op-tional forms satisfy the conditions set forthin that rule at all relevant ages. Thus, whenthe safe harbor hierarchy rule applies, themost valuable option for a participant witha short life expectancy will be the general-ized optional form for all participants.

These regulations also retain the re-quirement in the proposed regulationsunder which an amendment to eliminatean optional form of benefit under the coreoptions rule cannot apply to an optionalform of benefit with an annuity com-mencement date that is earlier than 4 yearsafter the date the amendment is adopted.Several commentators argued that the

waiting period before elimination of anoncore optional form of benefit be short-ened, with one commentator suggesting 90days, similar to the waiting period beforethe elimination of a redundant optionalform of benefit. Other commentators ar-gued that the waiting period before theelimination of a noncore optional form ofbenefit be increased to 5 years, similar tothe 5-year cliff vesting rule. However, nocommentator provided evidence that par-ticipants evaluate benefit choices over ashorter or longer period. Treasury and theIRS believe that the 4-year waiting periodbefore elimination of a noncore optionalform of benefit strikes the right balancebetween protecting participants’ expecta-tions about the various benefit choices intheir plans in coordination with decisionsrelating to retirement planning, while re-ducing burdens on plans. Thus, the 4-yearwaiting period before the elimination of anoncore optional form of benefit has beenretained in these regulations.

As stated earlier under the heading Mul-tiple amendment rule, the final regulationsprovide that a plan amendment violatessection 411(d)(6) if it is one of a seriesof plan amendments that, when taken to-gether, have the effect of reducing or elim-inating section 411(d)(6) protected bene-fits in a manner that would violate section411(d)(6) if accomplished through a sin-gle amendment. These final regulationsadd a rule that, for purposes of the mul-tiple amendment rule, only plan amend-ments made within a 3-year period are gen-erally taken into account. Notwithstandingthis 3-year rule, the final regulations alsoadd a rule that if a plan is amended to elim-inate an optional form of benefit using thecore option rule, the employer must wait3 years after the first annuity commence-ment date for which the optional form ofbenefit is no longer available before reduc-ing or eliminating any core options offeredunder the plan.

C. Elimination of early retirement benefitsand retirement-type subsidies that are ofde minimis value

The final regulations retain from theproposed regulations the additional re-quirements that a plan amendment mustsatisfy if the retained optional form of

benefit or each core option offered underthe plan does not have the same annu-ity starting date or has a lower actuarialpresent value than the optional form ofbenefit being eliminated. In such a case,the plan amendment is only permitted toreduce or eliminate a section 411(d)(6)(B)protected benefit that creates significantburdens or complexities for the plan andits participants, but only if eliminationdoes not adversely affect the rights ofany participant in more than a de minimismanner.

The regulations generally retain the rulein the proposed regulations which providesthat a reduction in actuarial present value isof no more than a de minimis amount if thereduction does not exceed the greater of2% of the present value of the retirement-type subsidy under the eliminated optionalform of benefit (if any) prior to the amend-ment or 1% of the participant’s compensa-tion for the prior plan year (as defined insection 415(c)(3)). Several commentatorsoffered suggestions to change this de min-imis value test. Some commentators sug-gested that the 2% threshold be increasedin order to make the ability to eliminatethe subsidy more meaningful. The com-mentators suggested an increase up to 5%of the retirement-type subsidy. In addi-tion, other commentators argued that 2%threshold should be changed from a per-centage of the retirement-type subsidy to apercentage of the eliminated optional formof benefit. Under this suggestion, the mar-gin of difference would be permitted tobe significantly greater. Other commenta-tors argued that the 2% threshold shouldbe lowered in order to reflect Congres-sional intent in the examples illustrating deminimis reductions in the EGTRRA con-ference report.6 These suggestions rangedfrom 1.5% to 1% of the retirement-typesubsidy. These commentators also recom-mended that the 1% of compensation deminimis threshold be reduced. In addition,some commentators suggested that a planamendment eliminating a retirement-typesubsidy should be required to satisfy bothtests, instead of the 2 tests being alterna-tives.

These final regulations do not adoptthese suggestions. The examples in theEGTRRA conference report are explicitlyexpressed as examples, not rules. The per-

6 H.R. Conf. Rep. 107–84, at 254 (2001).

September 19, 2005 543 2005–38 I.R.B.

centage thresholds in the de minimis valuetest are rounded percentages based on thedollar amounts in the EGTRRA confer-ence report, and, thus, they accurately re-flect the intent of EGTRRA and the leg-islative history. Accordingly, the final reg-ulations retain the percentage thresholdsfrom the proposed regulations.

Several commentators also noted thatthe 1% of compensation test would haveno application to terminated vested partic-ipants because terminated participants fre-quently have no current or prior year com-pensation from the employer. Other com-mentators argued that the 1% of compen-sation test does not accurately reflect allemployment situations, such as those par-ticipants who may take a leave of absenceor begin a reduced work schedule. In lightof these comments, the regulations providethat the 1% of compensation test is appliedusing the greater of the participant’s com-pensation (within the meaning of section415(c)(3)) for the prior plan year or theparticipant’s average compensation for hisor her high 3 years (within the meaning ofsection 415(b)(1)(B) and (b)(3)).

These regulations retain the rule inthe proposed regulations under which afacts and circumstances analysis appliesto determine whether a plan amendmenteliminates section 411(d)(6)(B) protectedbenefits that create significant burdens andcomplexities for a plan and its participants.Under this rule, for a plan amendmenteliminating a retirement-type subsidyor changing actuarial factors, the factsand circumstances to consider includethe number of different retirement-typesubsidies and other actuarial factors avail-able under the plan, whether the termsand conditions applicable to the plan’sretirement-type subsidies are difficult tosummarize in a manner that is concise andreadily understandable to the average planparticipant, whether those different retire-ment-type subsidies and other actuarialfactors were added to the plan as a resultof mergers, acquisitions, or other businesstransactions, and whether the effect of theplan amendment is to reduce the numberof categories of retirement-type subsidiesor other actuarial factors.

Several commentators stated that thisfacts and circumstances standard is vagueand subjective. The commentators sug-

gested that the standard should be revisedto provide for more objective criteria to de-termine the circumstances under which aplan amendment is permitted to eliminate asection 411(d)(6)(B) protected benefit thatcreates significant burdens or complexitiesfor a plan and its participants. The com-mentators also suggested that the final reg-ulations include examples of the standard.

In light of these comments, the finalregulations add 2 new factors to the factsand circumstances analysis for retire-ment-type subsidies and actuarial factors.These new factors are whether the planamendment eliminates one or more gen-eralized optional forms and whether theplan amendment replaces a complex op-tional form of benefit with a simpler form.An example has been added to the finalregulations to illustrate this facts and cir-cumstances analysis.

Like the proposed regulations, the fi-nal regulations provide a rebuttable pre-sumption for plan amendments that elimi-nate a set of actuarial factors under the planthat, considered in the aggregate, are bur-densome or complex. If this is the case,then the elimination of any set of actu-arial factors is presumed to eliminate sec-tion 411(d)(6)(B) protected benefits thatcreate significant burdens or complexitiesfor the plan and its participants. How-ever, the regulations also provide that if theeffect of a plan amendment with respectto an optional form of benefit is merelyto substitute one set of actuarial factorsfor another set of actuarial factors, with-out any reduction in the number of dif-ferent actuarial factors, the plan amend-ment would not be permitted. Commen-tators stated that this “no substitution” rulein the proposed regulations would offer norelief to plans that wish merely to updatetheir plans with actuarial assumptions thatreflect more recent experience. Anothercommentator similarly suggested that theregulations should permit a plan to updateits mortality tables. In response to thesecomments, the final regulations providean exception to the “no substitution” rulefor situations in which a plan is changingactuarial factors for determining optionalforms of benefit with new actuarial factorsthat are based on more accurate mortal-ity experience or more appropriate interest

rates (e.g., interest rates that reflect morerecent rates of returns).

IV. Other Issues

A. Contingent event benefits

In Notice 2003–10, 2003–1 C.B. 369,Treasury and the IRS announced that reg-ulations would be proposed that wouldprovide guidance on benefits that aretreated as early retirement benefits andretirement-type subsidies for purposesof section 411(d)(6)(B). Notice 2003–10also provided that the regulations will beprospective and the IRS will not treat aplan as failing to satisfy the requirementsof section 401 merely because of a planamendment that eliminates or reducesan early retirement benefit or a retire-ment-type subsidy that is conditioned onthe occurrence of an unpredictable contin-gent event (within the meaning of section412(l)) if the amendment is adopted andeffective prior to the occurrence of thecontingent event and prior to the publica-tion of the final regulations in the FederalRegister.

These final regulations generally retainthe rule in the proposed regulations whichprovided that benefits that are contingenton the occurrence of certain events, suchas a plant shutdown or involuntary sepa-ration, and that continue after retirementare retirement-type subsidies that are pro-tected under section 411(d)(6)(B), both be-fore and after the occurrence of the contin-gency.7 However, as noted above under theheading Definitions of section 411(d)(6)protected benefits, this rule is limited tobenefits under a defined benefit plan thatare permitted to be in a qualified plan. Thisrule applies to amendments adopted afterDecember 31, 2005. For an amendmentadopted before January 1, 2006, the IRSwill not treat a plan as failing to be taxqualified under section 401(a) merely be-cause the plan amendment eliminates orreduces an early retirement benefit or a re-tirement-type subsidy that is conditionedon the occurrence of an unpredictable con-tingent event (within the meaning of sec-tion 412(l)) if the amendment is adoptedand effective prior to the occurrence of thecontingent event.

7 This rule follows the analysis in Bellas v. CBS, Inc..

2005–38 I.R.B. 544 September 19, 2005

B. Effect of Central Laborers’ decision

Since the issuance of the proposed reg-ulations on March 24, 2004, the SupremeCourt issued its opinion in Central Labor-ers’ Pension Fund v. Heinz, 541 U.S. 749(June 7, 2004). This case addressed anissue that was reserved in the proposedregulations, pending the final decision inCentral Laborers’, namely the interactionof the vesting rules in section 411(a) withthe anti-cutback rules in section 411(d)(6).This topic is reserved in these final reg-ulations and addressed in proposed regu-lations (REG–156518–04) that are beingpublished elsewhere in this issue of theBulletin.

C. Utilization test

Comments were made prior to theissuance of the proposed regulations re-questing relief from section 411(d)(6) toenable plans to eliminate optional formsof benefit that participants rarely use.The preamble to the proposed regulationsnoted the difficulty in applying a utiliza-tion standard for plans where there are fewretirements. However, comments on theproposed regulations asked Treasury andthe IRS to consider adding a utilizationtest to the regulations as an acceptablemethod of eliminating optional forms ofbenefit, early retirement benefits, andretirement-type subsidies that are rarelyused. The commentators argued that rarelyused optional forms create a burden bothfor plans and their participants and thatutilization of an optional form of benefit isa good measure of a benefit’s value to par-ticipants in a plan. In light of these com-ments, Treasury and IRS are proposing autilization standard, which is included inproposed regulations (REG–156518–04)being published elsewhere in this issueof the Bulletin. Accordingly, these finalregulations provide a reserved paragraphfor such a utilization test.

Effective Dates

These final regulations apply to amend-ments adopted and effective after August12, 2005. However, there is a special ef-fective date for certain plan amendmentsas described above (under the headingContingent Event Benefits). Plan amend-ments adopted before August 12, 2005,are to be evaluated in light of the appli-

cable authorities without regard to theseregulations. No implication is intendedconcerning whether or not a rule adoptedprospectively in these regulations is appli-cable law before the effective date in theseregulations.

Special Analyses

It has been determined that this Trea-sury Decision is not a significant regula-tory action as defined in Executive Order12866. Therefore, a regulatory assessmentis not required. It has also been determinedthat section 553(b) of the AdministrativeProcedure Act (5 U.S.C. chapter 5) doesnot apply to these regulations. In addition,because no collection of information is im-posed on small entities, the provisions ofthe Regulatory Flexibility Act (5 U.S.C.chapter 6) do not apply, and therefore, aRegulatory Flexibility Analysis is not re-quired. Pursuant to section 7805(f) of theCode, the notice of proposed rulemakingpreceding these regulations was submittedto the Small Business Administration forcomment on its impact on small business.

Drafting Information

The principal author of these regula-tions is Pamela R. Kinard of the Officeof the Division Counsel/Associate ChiefCounsel (Tax Exempt and GovernmentEntities), Internal Revenue Service. How-ever, personnel from other offices of theInternal Revenue Service and TreasuryDepartment participated in their develop-ment.

* * * * *

Amendments to the Regulations

Accordingly, 26 CFR parts 1 and 54 areamended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation forpart 1 is amended by adding an entry toread, in part, as follows:

Authority: 26 U.S.C. 7805 * * *§1.411(d)–3 also issued under 26

U.S.C. 411(d)(6) and section 645(b) ofthe Economic Growth and Tax ReliefReconciliation Act of 2001, Public Law107–16 (115 Stat. 38).* * *

Par. 2. Section 1.411(d)–3 is revised toread as follows:

§1.411(d)–3 Section 411(d)(6) protectedbenefits.

(a) Protection of accrued benefits—(1)General rule. Under section 411(d)(6)(A),a plan is not a qualified plan (and a trustforming a part of such plan is not a qual-ified trust) if a plan amendment decreasesthe accrued benefit of any plan participant,except as provided in section 412(c)(8),section 4281 of the Employee RetirementIncome Security Act of 1974 as amended(ERISA), or other applicable law (e.g., sec-tion 1541(a)(2) of the Taxpayer Relief Actof 1997, Public Law 105–34 (111 Stat.788, 1085)). For purposes of this section,a plan amendment includes any changesto the terms of a plan, including changesresulting from a merger, consolidation, ortransfer (as defined in section 414(l)) or aplan termination. The protection of section411(d)(6) applies to a participant’s entireaccrued benefit under the plan as of the ap-plicable amendment date, without regardto whether the entire accrued benefit wasaccrued before a participant’s severancefrom employment or whether any portionwas the result of an increase in the accruedbenefit of the participant pursuant to a planamendment adopted after the participant’sseverance from employment.

(2) Plan provisions taken into ac-count—(i) Direct or indirect reduction inaccrued benefit. For purposes of deter-mining whether a participant’s accruedbenefit is decreased, all of the amend-ments to the provisions of a plan affecting,directly or indirectly, the computation ofaccrued benefits are taken into account.Plan provisions indirectly affecting thecomputation of accrued benefits include,for example, provisions relating to yearsof service and compensation.

(ii) Amendments effective with the sameapplicable amendment date. In determin-ing whether a reduction in a participant’saccrued benefit has occurred, all planamendments with the same applicableamendment date are treated as one amend-ment. Thus, if two amendments have thesame applicable amendment date and oneamendment, standing alone, increases par-ticipants’ accrued benefits and the otheramendment, standing alone, decreasesparticipants’ accrued benefits, the amend-ments are treated as one amendment andwill only violate section 411(d)(6) if, forany participant, the net effect is to de-

September 19, 2005 545 2005–38 I.R.B.

crease participants’ accrued benefit as ofthat applicable amendment date.

(iii) Multiple amendments—(A) Gen-eral rule. A plan amendment violates therequirements of section 411(d)(6) if it isone of a series of plan amendments that,when taken together, have the effect of re-ducing or eliminating a section 411(d)(6)protected benefit in a manner that would beprohibited by section 411(d)(6) if accom-plished through a single amendment.

(B) Determination of the time periodfor combining plan amendments. For pur-poses of applying the rule in paragraph(a)(2)(iii)(A) of this section, generally onlyplan amendments adopted within a 3-yearperiod are taken into account.

(3) Application of section 411(a) non-forfeitability provisions with respect tosection 411(d)(6) protected benefits. [Re-served].

(4) Examples. The following examplesillustrate the application of this paragraph(a):

Example 1. (i) Facts. Plan A provides an annualbenefit of 2% of career average pay times years of ser-vice commencing at normal retirement age (age 65).Plan A is amended on November 1, 2006, effective asof January 1, 2007, to provide for an annual benefitof 1.3% of final pay times years of service, with finalpay computed as the average of a participant’s high-est 3 consecutive years of compensation. As of Jan-uary 1, 2007, Participant M has 16 years of service,M’s career average pay is $37,500, and the averageof M’s highest 3 consecutive years of compensationis $67,308. Thus, Participant M’s accrued benefit asof the applicable amendment date is increased from$12,000 per year at normal retirement age (2% times$37,500 times 16 years of service) to $14,000 per yearat normal retirement age (1.3% times $67,308 times16 years of service). As of January 1, 2007, Partic-ipant N has 6 years of service, N’s career averagepay is $50,000, and the average of N’s highest 3 con-secutive years of compensation is $51,282. Partici-pant N’s accrued benefit as of the applicable amend-ment date is decreased from $6,000 per year at nor-mal retirement age (2% times $50,000 times 6 yearsof service) to $4,000 per year at normal retirementage (1.3% times $51,282 times 6 years of service).

(ii) Conclusion. While the plan amendment in-creases the accrued benefit of Participant M, the planamendment fails to satisfy the requirements of sec-tion 411(d)(6)(A) because the amendment decreasesthe accrued benefit of Participant N below the levelof the accrued benefit of Participant N immediatelybefore the applicable amendment date.

Example 2. (i) Facts. The facts are the same asExample 1, except that Plan A includes a provisionunder which Participant N’s accrued benefit cannotbe less than what it was immediately before the ap-plicable amendment date (so that Participant N’s ac-crued benefit could not be less than $6,000 per yearat normal retirement age).

(ii) Conclusion. The amendment does not violatethe requirements of section 411(d)(6)(A) with respectto Participant M (whose accrued benefit has been in-creased) or with respect to Participant N (althoughParticipant N would not accrue any benefits until thepoint in time at which the new formula amount wouldexceed the amount payable under the minimum pro-vision, approximately 3 years after the amendmentbecomes effective).

(b) Protection of section 411(d)(6)(B)protected benefits—(1) General rule—(i)Prohibition against plan amend-ments eliminating or reducing section411(d)(6)(B) protected benefits. Except asprovided in this section, a plan is treatedas decreasing an accrued benefit if it isamended to eliminate or reduce a section411(d)(6)(B) protected benefit as definedin paragraph (g)(15) of this section. Thisparagraph (b)(1) applies to participantswho satisfy (either before or after the planamendment) the preamendment condi-tions for a section 411(d)(6)(B) protectedbenefit.

(ii) Contingent benefits. The rules ofparagraph (b)(1)(i) of this section applyto participants who satisfy (either be-fore or after the plan amendment) thepreamendment conditions for the section411(d)(6)(B) protected benefit even if thecondition on which the eligibility for thesection 411(d)(6)(B) protected benefit de-pends is an unpredictable contingent event(e.g., a plant shutdown).

(iii) Application of general rules inparagraph (a) of this section to section411(d)(6)(B) protected benefits. For pur-poses of determining whether a partic-ipant’s section 411(d)(6)(B) protectedbenefit is eliminated or reduced, the rulesof paragraph (a) of this section apply tosection 411(d)(6)(B) protected benefits inthe same manner as they apply to accruedbenefits described in section 411(d)(6)(A).As an example of the application of para-graph (a)(2)(ii) of this section to section411(d)(6)(B) protected benefits, if thereare two amendments with the same appli-cable amendment date and one amendmentincreases accrued benefits and the otheramendment decreases the early retirementfactors that are used to determine the earlyretirement annuity, the amendments aretreated as one amendment and only vi-olate section 411(d)(6) if, after the twoamendments, the net dollar amount ofany early retirement annuity with respectto the accrued benefit of any participantas of the applicable amendment date is

lower than it would have been without thetwo amendments. As an example of theapplication of paragraph (a)(2)(iii) of thissection to section 411(d)(6)(B) protectedbenefits, a series of amendments madewithin a 3-year period that, when takentogether, have the effect of reducing oreliminating early retirement benefits orretirement-type subsidies in a manner thatadversely affects the rights of any partic-ipant in a more than de minimis mannerviolates section 411(d)(6)(B) even if eachamendment would be permissible pur-suant to paragraphs (c), (d), or (f) of thissection.

(2) Permissible elimination of section411(d)(6)(B) protected benefits—(i) Ingeneral. A plan is permitted to be amendedto eliminate a section 411(d)(6)(B) pro-tected benefit if the elimination is in ac-cordance with this section or §1.411(d)–4.

(ii) Increases in payment amounts donot eliminate an optional form of benefit.An amendment is not treated as elim-inating an optional form of benefit oreliminating or reducing an early retire-ment benefit or retirement-type subsidyunder the plan, if, effective after the planamendment, there is another optional formof benefit available to the participant un-der the plan that is of inherently equalor greater value (within the meaning of§1.401(a)(4)–4(d)(4)(i)(A)). Thus, forexample, a change in the method of cal-culating a joint and survivor annuity fromusing a 90% adjustment factor on accountof the survivorship payment at particularages for a participant and a spouse to us-ing a 91% adjustment factor at the sameages is not treated as an elimination ofan optional form of benefit. Similarly,a plan that offers a subsidized qualifiedjoint and survivor annuity option for mar-ried participants under which the amountpayable during the participant’s lifetime isnot less than the amount payable under theplan’s straight life annuity is permitted tobe amended to eliminate the straight lifeannuity option for married participants.

(3) Permissible elimination of benefitsthat are not section 411(d)(6) protectedbenefits—(i) In general. Section 411(d)(6)does not provide protection for benefitsthat are ancillary benefits, other rightsand features, or any other benefits that arenot described in section 411(d)(6). See§1.411(d)–4, Q&A–1(d). However, a planmay not be amended to recharacterize

2005–38 I.R.B. 546 September 19, 2005

a retirement-type benefit as an ancillarybenefit. Thus, for example, a plan amend-ment to recharacterize any portion of anearly retirement subsidy as a social secu-rity supplement that is an ancillary benefitviolates section 411(d)(6).

(ii) No protection for future benefit ac-cruals. Section 411(d)(6) only protectsbenefits that accrue before the applicableamendment date. Thus, a plan is permittedto be amended to eliminate or reduce anearly retirement benefit, a retirement-typesubsidy, or an optional form of benefitwith respect to benefits that accrue afterthe applicable amendment date withoutviolating section 411(d)(6). However,section 4980F(e) of the Internal RevenueCode and section 204(h) of ERISA requirenotice of an amendment to an applica-ble pension plan that either provides fora significant reduction in the rate of fu-ture benefit accrual or that eliminates orsignificantly reduces an early retirementbenefit or a retirement-type subsidy. See§54.4980F–1 of this chapter generally,and see §54.4980F–1, Q&A–7(b) andQ&A–8(c) of this chapter, with respectto the circumstances under which suchnotice is required for a reduction in anearly retirement benefit or retirement-typesubsidy.

(4) Examples. The following examplesillustrate the application of this paragraph(b):

Example 1. (i) Facts involving amendments to anearly retirement subsidy. Plan A provides an annualbenefit of 2% of career average pay times years of ser-vice commencing at normal retirement age (age 65).Plan A is amended on November 1, 2006, effective asof January 1, 2007, to provide for an annual benefitof 1.3% of final pay times years of service, with finalpay computed as the average of a participant’s high-est 3 consecutive years of compensation. ParticipantM is age 50, M has 16 years of service, M’s careeraverage pay is $37,500, and the average of M’s high-est 3 consecutive years of compensation is $67,308.Thus, M’s accrued benefit as of the effective date ofthe amendment is increased from $12,000 per year atnormal retirement age (2% times $37,500 times 16years of service) to $14,000 per year at normal re-tirement age (1.3% times $67,308 times 16 years ofservice). (These facts are similar to the facts in Ex-ample 1 in paragraph (a)(4) of this section.) Beforethe amendment, Plan A permitted a former employeeto commence distribution of benefits as early as age55 and, for a participant with at least 15 years of ser-vice, actuarially reduced the amount payable in theform of a straight life annuity commencing beforenormal retirement age by 3% per year from age 60to age 65 and by 7% per year from age 55 throughage 59. Thus, before the amendment, the amount ofM’s early retirement benefit that would be payablefor commencement at age 55 was $6,000 per year

($12,000 per year minus 3% for 5 years and minus7% for 5 more years). The amendment also altersthe actuarial reduction factor so that, for a participantwith at least 15 years of service, the amount payablein a straight life annuity commencing before normalretirement age is reduced by 6% per year. As a re-sult, the amount of M’s early retirement benefit atage 55 becomes $5,600 per year after the amendment($14,000 minus 6% for 10 years).

(ii) Conclusion. The straight life annuity payableunder Plan A at age 55 is an optional form of bene-fit that includes an early retirement subsidy. The planamendment fails to satisfy the requirements of sec-tion 411(d)(6)(B) because the amendment decreasesthe optional form of benefit payable to ParticipantM below the level that Participant M was entitled toreceive immediately before the effective date of theamendment. If instead Plan A had included a pro-vision under which M’s straight life annuity payableat any age could not be less than what it was imme-diately before the amendment (so that M’s straightlife annuity payable at age 55 could not be less than$6,000 per year), then the amendment would not failto satisfy the requirements of section 411(d)(6)(B)with respect to M’s straight life annuity payable atage 55 (although the straight life annuity payable to Mat age 55 would not increase until the point in time atwhich the new formula amount with the new actuarialreduction factors exceeds the amount payable underthe minimum provision, approximately 14 months af-ter the amendment becomes effective).

Example 2. (i) Facts involving plant shutdownbenefits. Plan B permits participants who have a sev-erance from employment before normal retirementage (age 65) to commence distributions at any timeafter age 55 with the amount payable to be actuari-ally reduced using reasonable actuarial assumptionsregarding interest and mortality specified in the plan,but provides that the annual reduction for any partic-ipant who has at least 20 years of service and whohas a severance from employment after age 55 is only3% per year (which is a smaller reduction than wouldapply under reasonable actuarial reductions). Plan Balso provides two plant shutdown benefits to partic-ipants who have a severance of employment as a re-sult of a plant shutdown. First, the favorable 3% peryear actuarial reduction applies for commencementof benefits after age 55 and before age 65 for anyparticipant who has at least 10 years of service andwho has a severance from employment as a result ofa plant shutdown. Second, all participants who haveat least 20 years of service and who have a sever-ance from employment after age 55 (and before nor-mal retirement age at age 65) as a result of a plantshutdown will receive supplemental payments. Un-der the supplemental payments, an additional amountequal to the participant’s estimated old-age insurancebenefit under the Social Security Act is payable un-til age 65. The supplemental payments are not aQSUPP, as defined in §1.401(a)(4)–12, because theplan’s terms do not state that the supplement is treatedas an early retirement benefit that is protected undersection 411(d)(6).

(ii) Conclusion with respect to plant shutdownbenefits. The benefits payable with the 3% annualreduction are retirement-type benefits. The excessof the actuarial present value of the early retirementbenefit using the 3% annual reduction over the actu-arial present value of the normal retirement benefit is

a retirement-type subsidy and the right to receive pay-ments of the benefit at age 55 is an early retirementbenefit. These conclusions apply not only with re-spect to the rights that apply to participants who haveat least 20 years of service, but also to participantswith at least 10 years of service who have a sever-ance from employment as a result of a plant shut-down. Thus, the right to receive benefits based ona 3% annual reduction for participants with at least10 years of service at the time of a plant shutdownis an early retirement benefit that provides a retire-ment-type subsidy and is a section 411(d)(6)(B) pro-tected benefit (even though no plant shutdown has oc-curred). Therefore, a plan amendment cannot elimi-nate this benefit with respect to benefits accrued be-fore the applicable amendment date, even before theoccurrence of the plant shutdown. Because the planprovides that the supplemental payments cannot ex-ceed the OASDI benefit under the Social SecurityAct, the supplemental payments constitute a socialsecurity supplement (but not a QSUPP as defined in§1.401(a)(4)–12), which is an ancillary benefit thatis not a section 411(d)(6)(B) protected benefit andaccordingly is not taken into account in determiningwhether a prohibited reduction has occurred.

(c) Permissible elimination of optionalforms of benefit that are redundant—(1)General rule. Except as otherwise pro-vided in paragraph (c)(5) of this section, aplan is permitted to be amended to elimi-nate an optional form of benefit for a par-ticipant with respect to benefits accruedbefore the applicable amendment date if—

(i) The optional form of benefit is re-dundant with respect to a retained optionalform of benefit, within the meaning ofparagraph (c)(2) of this section;

(ii) The plan amendment is not applica-ble with respect to an optional form of ben-efit with an annuity commencement datethat is earlier than the number of daysin the maximum QJSA explanation pe-riod (as defined in paragraph (g)(9) of thissection) after the date the amendment isadopted; and

(iii) The requirements of paragraph (e)of this section are satisfied in any case inwhich either:

(A) The retained optional form of ben-efit for the participant does not commenceon the same annuity commencement dateas the optional form of benefit that is be-ing eliminated, or

(B) As of the date the amendment isadopted, the actuarial present value of theretained optional form of benefit for theparticipant is less than the actuarial presentvalue of the optional form of benefit that isbeing eliminated.

(2) Similar types of optional forms ofbenefit are redundant—(i) General rule.An optional form of benefit is redundant

September 19, 2005 547 2005–38 I.R.B.

with respect to a retained optional form ofbenefit if, after the amendment becomesapplicable—

(A) There is a retained optional form ofbenefit available to the participant that is inthe same family of optional forms of bene-fit, within the meaning of paragraphs (c)(3)and (4) of this section, as the optional formof benefit being eliminated; and

(B) The participant’s rights with respectto the retained optional form of benefit arenot subject to materially greater restric-tions (such as conditions relating to eligi-bility, restrictions on a participant’s abilityto designate the person who is entitled tobenefits following the participant’s death,or restrictions on a participant’s right to re-ceive an in-kind distribution) than appliedto the optional form of benefit being elim-inated.

(ii) Special rule for core options. Anoptional form of benefit that is a coreoption as defined in paragraph (g)(5) ofthis section may not be eliminated as aredundant benefit under the rules of thisparagraph (c) unless the retained optionalform of benefit and the eliminated coreoption are identical except for differencesdescribed in paragraph (c)(3)(ii) of thissection. Thus, for example, a particular10-year term certain and life annuity maynot be eliminated by plan amendment un-less the retained optional form of benefitis another 10-year term certain and lifeannuity.

(3) Family of optional forms of bene-fit—(i) In general. Paragraph (c)(4) of thissection describes certain families of op-tional forms of benefits. Not every op-tional form of benefit that is offered un-der a plan necessarily fits within a familyof optional forms of benefit as describedin paragraph (c)(4) of this section. Eachoptional form of benefit that is not in-cluded in any particular family of optionalforms of benefit listed in paragraph (c)(4)of this section is in a separate family of op-tional forms of benefit with other optionalforms of benefit that would be identical tothat optional form of benefit but for differ-ences that are disregarded under paragraph(c)(3)(ii) of this section.

(ii) Certain differences among optionalforms of benefit—(A) Differences in ac-tuarial factors and annuity starting dates.The determination of whether two optionalforms of benefit are within a family of op-tional forms of benefit is made without re-

gard to actuarial factors or annuity start-ing dates. Thus, any optional forms ofbenefit that are part of the same gener-alized optional form (within the meaningof paragraph (g)(8) of this section) are inthe same family of optional forms of ben-efit. For example, if a plan has a sin-gle-sum distribution option for some par-ticipants that is calculated using a 5% inter-est rate and a specific mortality table (butno less than the minimum present valueas determined under section 417(e)) andanother single-sum distribution option forother participants that is calculated usingthe applicable interest rate as defined insection 417(e)(3)(A)(ii)(II) and the appli-cable mortality table as defined in section417(e)(3)(A)(ii)(I), both single-sum distri-bution options are part of the same gener-alized optional form and thus in the samefamily of optional forms of benefit underthe rules of paragraph (c)(3)(i) of this sec-tion. However, differences in actuarial fac-tors and annuity starting dates are takeninto account for purposes of the require-ments in paragraph (e)(3) of this section.

(B) Differences in pop-up provisionsand cash refund features for joint andcontingent options. The determination ofwhether two optional forms of benefit arewithin a family of optional forms of bene-fit relating to joint and contingent families(as described in paragraph (c)(4)(i) and(ii) of this section) is made without regardto the following features—

(1) Pop-up provisions (under whichpayments increase upon the death of thebeneficiary or another event that causesthe beneficiary not to be entitled to a sur-vivor annuity);

(2) Cash refund features (under whichpayment is provided upon the death ofthe last annuitant in an amount that is notgreater than the excess of the present valueof the annuity at the annuity starting dateover the total of payments before the deathof the last annuitant); or

(3) Term-certain provisions for optionalforms of benefit within a joint and contin-gent family.

(C) Differences in social security lev-eling features, refund of employee contri-butions features, and retroactive annuitystarting date features. The determinationof whether two optional forms of benefitare within a family of optional forms ofbenefit is made without regard to socialsecurity leveling features, refund of em-

ployee contributions features, or retroac-tive annuity starting date features. But seeparagraph (c)(5) of this section for spe-cial rules relating to social security level-ing, refund of employee contributions, andretroactive annuity starting date features inoptional forms of benefit.

(4) List of families. The following arefamilies of optional forms of benefit forpurposes of this paragraph (c):

(i) Joint and contingent options withcontinuation percentages of 50% to 100%.An optional form of benefit is within the50% or more joint and contingent family ifit provides a life annuity to the participantand a survivor annuity to an individual thatis at least 50% and no more than 100% ofthe annuity payable during the joint livesof the participant and the participant’s sur-vivor.

(ii) Joint and contingent options withcontinuation percentages less than 50%.An optional form of benefit is within theless than 50% joint and contingent fam-ily if it provides a life annuity to the par-ticipant and a survivor annuity to an indi-vidual that is less than 50% of the annuitypayable during the joint lives of the partic-ipant and the participant’s survivor.

(iii) Term certain and life annuity op-tions with a term of 10 years or less. Anoptional form of benefit is within the 10years or less term certain and life familyif it is a life annuity with a guarantee thatpayments will continue to the participant’sbeneficiary for the remainder of a fixed pe-riod that is 10 years or less if the participantdies before the end of the fixed period.

(iv) Term certain and life annuity op-tions with a term longer than 10 years.An optional form of benefit is within thelonger than 10 years term certain and lifefamily if it is a life annuity with a guaran-tee that payments will continue to the par-ticipant’s beneficiary for the remainder ofa fixed period that is in excess of 10 yearsif the participant dies before the end of thefixed period.

(v) Level installment payment optionsover a period of 10 years or less. An op-tional form of benefit is within the 10 yearsor less installment family if it provides forsubstantially level payments to the partici-pant for a fixed period of at least two yearsand not in excess of 10 years with a guaran-tee that payments will continue to the par-ticipant’s beneficiary for the remainder of

2005–38 I.R.B. 548 September 19, 2005

the fixed period if the participant dies be-fore the end of the fixed period.

(vi) Level installment payment optionsover a period of more than 10 years. Anoptional form of benefit is within the morethan 10 years installment family if it pro-vides for substantially level payments tothe participant for a fixed period that is inexcess of 10 years with a guarantee thatpayments will continue to the participant’sbeneficiary for the remainder of the fixedperiod if the participant dies before the endof the fixed period.

(5) Special rules for certain features in-cluded in optional forms of benefit. Forpurposes of applying this paragraph (c), tothe extent an optional form of benefit thatis being eliminated includes either a socialsecurity leveling feature or a refund of em-ployee contributions feature, the retainedoptional form of benefit must also includethat feature, and, to the extent that the op-tional form of benefit that is being elim-inated does not include a social securityleveling feature or a refund of employeecontributions feature, the retained optionalform of benefit must not include that fea-ture. For purposes of applying this para-graph (c), to the extent an optional formof benefit that is being eliminated does notinclude a retroactive annuity starting datefeature, the retained optional form of ben-efit must not include the feature.

(d) Permissible elimination of noncoreoptional forms of benefit where core op-tions are offered—(1) General rule. Ex-cept as otherwise provided in paragraph(d)(2) of this section, a plan is permitted tobe amended to eliminate an optional formof benefit for a participant with respectto benefits accrued before the applicableamendment date if—

(i) After the amendment becomes appli-cable, each of the core options described inparagraph (g)(5) of this section is availableto the participant with respect to benefitsaccrued before and after the amendment;

(ii) The plan amendment is not applica-ble with respect to an optional form of ben-efit with an annuity commencement datethat is earlier than 4 years after the date theamendment is adopted; and

(iii) The requirements of paragraph (e)of this section are satisfied in any case inwhich either:

(A) One or more of the core options arenot available commencing on the same an-

nuity commencement date as the optionalform of benefit that is being eliminated, or

(B) As of the date the amendment isadopted, the actuarial present value of thebenefit payable under any core option withthe same annuity commencement date isless than the actuarial present value of ben-efits payable under the optional form ofbenefit that is being eliminated.

(2) Special rules—(i) Treatment of cer-tain features included in optional forms ofbenefit. For purposes of applying this para-graph (d), to the extent an optional form ofbenefit that is being eliminated includes ei-ther a social security leveling feature or arefund of employee contributions feature,at least one of the core options must also beavailable with that feature, and, to the ex-tent that the optional form of benefit thatis being eliminated does not include a so-cial security leveling feature or a refundof employee contributions feature, each ofthe core options must be available with-out that feature. For purposes of apply-ing this paragraph (d), to the extent an op-tional form of benefit that is being elimi-nated does not include a retroactive annu-ity starting date feature, each of the coreoptions must be available without that fea-ture.

(ii) Eliminating the most valuable op-tion for a participant with a short lifeexpectancy. For purposes of applying thisparagraph (d), if the most valuable op-tion for a participant with a short lifeexpectancy (as defined in paragraph(g)(5)(iii) of this section) is eliminated,then, after the plan amendment, an op-tional form of benefit that is identical,except for differences described in para-graph (c)(3)(ii) of this section, must beavailable to the participant. However,such a plan amendment cannot eliminate arefund of employee contributions featurefrom the most valuable option for a partic-ipant with a short life expectancy.

(iii) Single-sum distributions. A planamendment is not treated as satisfying thisparagraph (d) if it eliminates an optionalform of benefit that includes a single-sumdistribution that applies with respect to atleast 25% of the participant’s accrued ben-efit as of the date the optional form of ben-efit is eliminated. But see §1.411(d)–4,Q&A–2(b)(2)(v), relating to involuntarysingle-sum distributions for benefits witha present value not in excess of the maxi-mum dollar amount in section 411(a)(11).

(iv) Application of multiple amendmentrule to core option rule. Notwithstand-ing paragraph (a)(2)(iii)(B) of this section,if a plan is amended to eliminate an op-tional form of benefit using the core op-tions rule in this paragraph (d), then theemployer must wait 3 years after the firstannuity commencement date for which theoptional form of benefit is no longer avail-able before making any changes to the coreoptions offered under the plan (other thana change that is not treated as an elimina-tion under paragraph (b)(2)(ii) of this sec-tion). Thus, for example, if a plan amend-ment eliminates an optional form of bene-fit for a participant using the core optionsrule under this paragraph (d), with an adop-tion date of January 1, 2006 and an ef-fective date of January 1, 2010, the planwould not be permitted to be amended tomake changes to the core options offeredunder the plan (and the core options wouldcontinue to apply with respect to the par-ticipant’s accrued benefit) until January 1,2013.

(v) Special rule for joint and contin-gent annuity core option. If a plan of-fers joint and contingent annuities underwhich a participant is entitled to a life an-nuity with a survivor annuity for the in-dividual designated by the participant (in-cluding a non-spousal contingent annui-tant) with continuation percentage optionsof both 50% and 100% (after adjustmentspermitted under paragraph (g)(5)(ii) of thissection to comply with applicable law), theplan is permitted to treat both of these op-tions as core options for purposes of thisparagraph (d), in lieu of a 75% joint andcontingent annuity. Thus, such a plan ispermitted to use the rules of this paragraph(d) if the plan satisfies all of the require-ments of this paragraph (d) (taking into ac-count the modification rule in paragraph(g)(5)(ii) of this section) other than the re-quirement of offering a 75% joint and con-tingent annuity as described in paragraph(g)(5)(i)(B) of this section.

(e) Permissible plan amendments underparagraphs (c) and (d) eliminating or re-ducing section 411(d)(6)(B) protected ben-efits that are burdensome and of de min-imis value—(1) In general. A plan amend-ment that, pursuant to paragraph (c)(1)(iii)or (d)(1)(iii) of this section, is requiredto satisfy this paragraph (e) satisfies thisparagraph (e) if—

September 19, 2005 549 2005–38 I.R.B.

(i) The amendment eliminates section411(d)(6)(B) protected benefits that createsignificant burdens or complexities for theplan and its participants as described inparagraph (e)(2) of this section; and

(ii) The amendment does not adverselyaffect the rights of any participant in amore than de minimis manner as describedin paragraph (e)(3) of this section.

(2) Plan amendments eliminating sec-tion 411(d)(6)(B) protected benefits thatcreate significant burdens and complexi-ties—(i) Facts and circumstances analy-sis—(A) In general. The determination ofwhether a plan amendment eliminates sec-tion 411(d)(6)(B) protected benefits thatcreate significant burdens or complexitiesfor the plan and its participants is based onfacts and circumstances.

(B) Early retirement benefits. In thecase of an amendment that eliminates anearly retirement benefit, relevant factorsinclude whet