The agency said the final regulations incorporate the transitional guidance provided under Notice 2007-6 as well as the provisions of the 2007 proposed regulations. The regulations adopt the terminology used in the proposed regulations (such as “statutory hybrid benefit formula” and “lump sum-based benefit formula”) to take into account situations where plans provide more than one benefit formula.
The regulations also provide additional guidance with respect to interest credits, taking into account comments received in response to the 2007 proposed regulations and also reflecting the enactment of Worker, Retiree, and Employer Recovery Act of 2008.
The regulations are effective immediately and generally apply to plans beginning after January 1, 2011.
The Pension Protection Act of 2006 provides that an applicable defined benefit plan (which is defined in section 411(a)(13)(C)) is not treated as failing to meet either (i) the requirements of section 411(a)(2) (subject to a special vesting rule in section 411(a)(13)(B) with respect to benefits derived from employer contributions) or (ii) the requirements of section 411(a)(11), 411(c), or 417(e), with respect to accrued benefits derived from employer contributions, merely because the present value of the accrued benefit (or any portion thereof) of any participant is, under the terms of the plan, equal to the amount expressed as the balance of a hypothetical account or as an accumulated percentage of the participant’s final average compensation. Section 411(a)(13)(B) requires an applicable defined benefit plan to provide that an employee who has completed at least three years of service has a nonforfeitable right to 100% of the employee’s accrued benefit derived from employer contributions.
The IRS said in general, the proposed regulations provide guidance with respect to certain issues under sections 411(a)(13) and 411(b)(5) that are not addressed in the 2010 final regulations, as well as an issue under section 411(b)(1) for hybrid defined benefit plans that adjust benefits using a variable rate.
The agency is requesting written or electronic comments be received by Wednesday, January 12, 2011. Outlines of topics to be discussed at the public hearing scheduled for Wednesday, January 26, 2011, at 10 a.m. must be received by Friday, January 14, 2011.The proposed and final rules will be published in the October 19 Federal Register.