The IRS has proposed regulations (REG-113738-12) that provide
guidance under the anti-cutback rules of Section 411(d)(6).
In general, the anti-cutback rules prohibit plan amendments that
eliminate or reduce accrued benefits, early retirement benefits,
retirement-type subsidies and optional forms of benefits under
qualified retirement plans. The proposed regulations would provide
an additional limited exception to the anti-cutback rules to permit
a plan sponsor that is a debtor in a bankruptcy proceeding to amend
its single-employer defined benefit plan to eliminate a single-sum
distribution option (or other optional form of benefit providing
for accelerated payments) under the plan in order to help prevent
the termination of the plan in bankruptcy, if four conditions are
In general, those conditions are that:
the plan's actuary certifies that the defined benefit plan
the plan sponsor is a debtor in a bankruptcy case under title
11, United States Code, or under similar federal or state law;
the court overseeing the bankruptcy case has issued an order,
after providing notice to each affected party and a hearing,
finding that the adoption of the amendment eliminating that
optional form of benefit is necessary to avoid a distress
termination of the plan pursuant to section 4041(c) of the Employee
Retirement Income Security Act (ERISA) or an involuntary
termination of the plan pursuant to section 4042 of ERISA before
the plan sponsor emerges from bankruptcy or before the bankruptcy
case is otherwise completed; and
the Pension Benefit Guaranty Corporation (PBGC) has issued a
determination that the adoption of the amendment eliminating that
optional form of benefit is necessary to avoid a distress or
involuntary termination of the plan before the plan sponsor emerges
from bankruptcy (or before the bankruptcy case is otherwise
completed) and the plan does not have sufficient assets to provide
These regulations are proposed to apply to plan amendments that
are adopted and effective after Aug. 31, 2012.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Internal Revenue Service has recently published an IRS Large Business & International Directive, which updates an earlier directive to field agents addressing the examination of capitalization and repair costs issues.