2010-32539. Hybrid Retirement Plans; Correction

AGENCY:

Internal Revenue Service (IRS), Treasury.

ACTION:

Correcting amendment.

SUMMARY:

This document contains correctioning amendments to correct errors resulting from the publication of to final regulations (TD 9505) that were published in the Federal Register on Tuesday, October 19, 2010 (75 FR 64123) providing guidance relating to certain provisions of the Internal Revenue Code that apply to hybrid defined benefit pension plans.

DATES:

This correcting amendment is effective on December 28, 2010, and is applicable on October 19, 2010.

FOR FURTHER INFORMATION CONTACT:

Neil S. Sandhu, Lauson C. Green, or Linda S. F. Marshall at [phone] (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The final regulations (TD 9505) that are the subject of this document are under section 411 of the Internal Revenue Code.

Need for Correction

As published, the final regulations (TD 9505) contain errors that may prove to be misleading and are in need of clarification.

List of Subject in 26 CFR Part 1

• Income taxes
• Reporting and recordkeeping requirements

Correction of Publication

Accordingly, 26 CFR part 1 is corrected by making the following correcting amendments:

PART 1—INCOME TAXES

Paragraph 1. The authority citation for part 1 continues to read in part as follows:

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

Par. 2. Section 1.411(b)(5)-1 is amended by:

1. Revising the paragraph (b)(1)(ii)(A).

2. Revising the first sentence of paragraph (b)(1)(iv) Example 4. (iii).

3. Revising the first sentence of paragraph (c)(5) Example 2. (iv).

4. Revising the third sentence of paragraph (c)(5) Example 3. (i).

5. Revising the paragraph (d)(1)(iii).

6. Revising the first sentence of paragraph (f)(2)(iii).

The revisions read as follows:

§ 1.411(b)(5)-1

Reduction in rate of benefit accrual under a defined benefit plan.

* * * * *

(b) * * *

(1) * * *

(ii) * * * (A) In general. Except as provided in paragraphs (b)(1)(ii)(B), (C), and (D) of this section, the safe harbor provided by section 411(b)(5)(A) and paragraph (b)(1)(i) of this section is available with respect to an individual only if the individual's accumulated benefit under the plan is expressed in terms of only one safe-harbor formula measure and no similarly situated, younger individual who is or could be a participant has an accumulated benefit that is expressed in terms of any measure other than that same safe-harbor formula measure. Thus, for example, if a plan provides that the accumulated benefit of participants who are age 55 or over is expressed under the terms of the plan as a life annuity payable at normal retirement age (or current age, if later) as described in paragraph (b)(1)(i)(A) of this section and the plan provides that the accumulated benefit of participants who are younger than age 55 is expressed as the current balance of a hypothetical account as described in paragraph (b)(1)(i)(B) of this section, then the safe harbor described in section 411(b)(5)(A) and paragraph (b)(1)(i) of this section does not apply to individuals who are or could be participants who are age 55 or over.

(iv) * * *

Example 4.

* * *

(iii) * * * If, instead of the facts in paragraph (i) of this Example 4, the plan had been amended to provide only participants who have not yet attained age 55 by January 1, 2012, with a benefit that is the greater of the benefit under the average annual compensation formula and a benefit that is based on the balance of a hypothetical account, then the safe harbor would not be satisfied with respect to individuals who have attained age 55 by January 1, 2012. * * *

* * * * *

(c) * * *

(5) * * *

Example 2.

* * *

(iv) * * * The plan provides that, as of a participant's annuity starting date, the plan will determine whether the benefit attributable to the opening hypothetical account balance payable in the particular optional form of benefit selected is equal to or greater than the benefit accrued under the plan through the date of conversion and payable in the same generalized optional form of benefit with the same annuity starting date. * * *

Example 3.

* * * (i) * * * Under the terms of Plan E, the benefit attributable to A's opening hypothetical account balance is increased so that A's straight life annuity commencing on January 1, 2015, is $1,000 per month. * * *

* * * * *

(d) * * *

(1) * * *

(iii) Market rate of return for single rates. Except as otherwise provided in this paragraph (d)(1), an interest crediting rate is not in excess of a market rate of return only if the plan terms provide that the interest credit for each plan year is determined using one of the following specified interest crediting rates:

* * * * *

(f) * * *

(2) * * *

(iii) * * * For the periods after the statutory effective date set forth in paragraph (f)(1) of this section and before the regulatory effective date set forth in paragraph (f)(2)(i) of this section, the safe harbor and other relief of section 411(b)(5) apply and the market rate of return and other requirements of section 411(b)(5) must be satisfied. * * *

Guy R. Traynor

Acting Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel, Procedure and Administration.