3764. What is the anti-cutback rule and to which benefits does it apply?Nuco Employeercline202010-08-24T19:50:00Z2014-08-15T20:51:00Z2014-08-15T20:51:00Z47214113Summit Business Media349482514Site Map/Retirement Plans/Pension And Profit Sharing/Qualification/Vesting411(d)(6) protected benefits2005-01-25T00:00:00ZTaxFactsDefaultArticle115970335-00-tf1.xml337.00;#2257;#0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900242457EFB8B24247815D688C526CD44D009C4E67E972694125ABDA91AC61F5E51FTax Facts 1What is the anti-cutback rule and what benefits does it protect?117700.000000000TaxFactsDefaultArticleSBMEDIA\moss-admin2010-01-15T00:44:42Z3764.01. What is the anti-cutback rule and to which benefits does it apply?ERISA and the Code contain provisions that protect participants and beneficiaries. The anti-cutback rule prohibits a plan amendment that decreases, directly or indirectly, the accrued benefit of a participant.IRC Sec. 411(d)(6)(A); ERISA Sec. 204(g). An exception may be available in certain cases of substantial business hardship; see below.Except as otherwise provided below, a plan amendment that has the effect of eliminating or reducing an early retirement benefit or a retirement-type subsidy, or eliminating certain optional forms of benefit attributable to service before the amendment is treated as impermissibly reducing accrued benefits.IRC Sec. 411(d)(6)(B); see Treas. Reg. §1.411(d)-4, A-1(a). Regulations include a list of benefits that are not protected in Treasury Regulation Section 1.411(a)-4, A-1(d).The anti-cutback rule does not prohibit any plan amendment that reduces or eliminates benefits or subsidies that create significant burdens or complexities for the plan and plan participants unless the amendment adversely affects the rights of any participant in a more than de minimis manner.IRC Sec. 411(d)(6)(B). If a series of plan amendments made at different times have the effect, when taken together, of reducing or eliminating a protected benefit in a more than de minimis manner, the amendment will violate IRC Section 411(d)(6).Treas. Reg. §1.411(d)-4, A-2(c).Employee stock ownership plans (“ESOPs”) (Q 3720) will not be treated as failing to meet the anti-cutback requirement merely on account of modifying distribution options in a nondiscriminatory manner.IRC Sec. 411(d)(6)(C); Treas. Reg. §1.411(d)-4, A-2(d); Notice 2013-17, 2013-20 I.R.B. 1082.Transfers Between PlansBenefits that are protected under IRC Section 411(d)(6) may not be eliminated by reason of a transfer or any transaction amending or having the effect of amending a plan to transfer benefits. A defined contribution “transferee” plan (e.g., in a merger, acquisition, consolidation, or similar transaction) will not be treated as failing the anti-cutback rule merely because the transferee plan does not provide some or all of the forms of distribution previously available under a transferor plan, if certain requirements are met.IRC Sec. 411(d)(6)(D); see Treas. Reg. §1.411(d)-4, A-3(b).Elimination of a Form of DistributionExcept to the extent provided in regulations, a defined contribution plan will not be treated as failing the anti-cutback rule merely because of the elimination of a form of distribution previously available under the plan, provided that, with respect to any participant, a single sum payment is available to the participant at the same time or times as the form of distribution being eliminated and the single sum payment is based on the same or greater portion of the participant’s account as the form of distribution being eliminated.IRC Sec. 411(d)(6)(E).3764.02. Are there any circumstances where a plan may be amended to eliminate an optional form of benefit? What is the redundancy rule?A plan generally may be amended to eliminate an optional form of benefit with respect to benefits accrued before the amendment date if the optional form of benefit is redundant with a retained optional form of benefit.Treas. Reg. §1.411(d)-3(c)(1)(ii). For this purpose, the regulations identify six basic “families” of optional forms of benefit: (1)the 50 percent or more joint and contingent family, (2)the below 50 percent joint and contingent family, (3)the ten years or less term certain and life annuity family, (4)the greater than ten years term certain and life annuity family, (5)the ten years or less level installment family, and (6)the greater than ten years level installment family.Treas. Reg. §1.411(d)-3(c)(4). The redundancy rule does not apply to certain “core options” unless the retained optional form of benefit and the eliminated option are identical except for differences described in the proposed regulations.See Treas. Reg. §1.411(d)-3(c)(2)(ii).As an alternative to the redundancy rule, an employer is permitted to eliminate a protected benefit if the amendment does not apply to participants with annuity starting dates less than four years after the date the amendment is adopted and certain “core options” are retained.Treas. Reg. §1.411(d)-3(d). The core options generally mean (1)a straight life annuity, (2)a 75 percent joint and contingent annuity, (3)a ten year certain and life annuity, and (4)the most valuable option for a participant with a short life expectancy.Treas. Reg. §1.411(d)-3(g)(5).Planning Point: A plan may be amended to meet the requirements of IRC Section 436 regarding benefit accruals and limitations without violating the anti-cutback rule. Notice 2011-96 provides a sample plan amendment.2011-52 IRB 915. Notice 2012-70 extends the period by which such amendment may be adopted without violating IRC Section 411(d)(6).Notice 2012-70, 2012-2 CB 712. Special rules apply to plans in bankruptcy that allow the plan to eliminate optional forms of benefit that violates IRC Section 436 without violating IRC Section 411(d)(6).TD 9601 (Mar. 4, 2013) (adding 1.411(d)-4A-2(b)(2)(xii)).