a-00-71.pdf

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Part IV
Items of General Interest
Amendment of Qualified Plans for Final Regulations Under ' 411(d)(6)
Announcement 2000-71
Final regulations under ' 411(d)(6) of the Code were published in the Federal
Register on September 6, 2000. The regulations grant relief under ' 411(d)(6) by
permitting qualified defined contribution plans to be amended, under certain
conditions, to eliminate some alternative forms of payment and to eliminate or
limit the right to receive certain in-kind distributions. The final regulations also
permit certain transfers between plans that were not previously permitted. The
regulations generally apply to amendments adopted, and transfers made, on or
after September 6, 2000.
Effective September 6, 2000, plan sponsors may adopt plan amendments that
are permitted under the final regulations under ' 411(d)(6). Determination letters
that are issued with respect to plans for which an application is filed with the
Service on or after September 6, 2000, may be relied upon with respect to
whether a plan satisfies the requirements of the final regulations.
Some plans might contain language that would necessitate a change to conform
to the final regulations (as described below). Such a plan must be amended, in
connection with its application for a determination letter, to satisfy the final
regulations. See below regarding the effective date of the amendment.
Plan sponsors that have determination letter applications on file with the Service
which were submitted before September 6, 2000, should contact the Service if
they wish to amend their plans and have the provisions of the final regulations
taken into account in their determination letters. Plan sponsors should contact
the EP specialist who has been assigned to review their application, if possible.
Otherwise, they should contact Customer Service on 1-877-829-5500. In these
cases, the Service will try to accommodate the plan sponsor’s request to have
the provisions of the final regulations taken into account in the determination
letter. However, if the EP specialist assigned to review the application has
already completed that review, the Service will not be able to accommodate the
plan sponsor’s request and a new application and user fee will be required.
In general, the final regulations expand the permitted changes that may be made
to alternative forms of payment and in-kind distributions under a defined
contribution plan and, in the case of voluntary direct transfers between plans, the
circumstances under which elimination of optional forms of benefit is permitted.

2
Generally, therefore, plan sponsors may choose to amend their plans as a result
of these changes, but are not required to do so, except as provided below.
The regulations under ' 411(d)(6), as in effect prior to September 6, 2000, (“the
1988 regulations”) permitted elimination of optional forms of benefit in connection
with voluntary direct transfers between plans, provided certain requirements were
satisfied. Section 401(a)(31), which was added after the 1988 regulations,
requires that participants be able to elect a direct rollover to an IRA or other
eligible retirement plan of any eligible rollover distribution. Because the
requirements of ' 411(d)(6) do not apply to amounts distributed, including those
amounts directly rolled over under ' 401(a)(31), the voluntary direct transfer rules
in the 1988 regulations produce the same ' 411(d)(6) result with respect to an
eligible rollover distribution as a direct rollover under ' 401(a)(31).
The final regulations under ' 411(d)(6) generally eliminate this duplication. The
final regulations provide, in part, that relief from the requirements of ' 411(d)(6) is
not available under the voluntary transfer rules where the participant is entitled to
elect a ' 401(a)(31) direct rollover because the participant is eligible to receive an
immediate distribution of the participant’s entire nonforfeitable accrued benefit in
a single-sum distribution that would consist entirely of an eligible rollover
distribution within the meaning of ' 401(a)(31)(C). This provision of the final
regulations is effective for transfers occurring on or after January 1, 2002.
Some plans might contain pre-existing provisions that permit elimination of
optional forms of benefit pursuant to the voluntary direct transfer rules as in effect
under the 1988 regulations. To the extent that these plan provisions are
inconsistent with the final regulations under ' 411(d)(6), as described in the
preceding paragraph, the plan must be amended. The amended plan must
provide that the benefit of a participant described in the preceding paragraph
may be voluntarily transferred only through a ' 401(a)(31) direct rollover.
Any plan amendment required to conform the plan terms to the final ' 411(d)(6)
regulations does not have to be adopted prior to the end of the plan’s GUST
remedial amendment period, as described in Rev. Proc. 2000-27, 2000-26 I.R.B.
1272, and Rev. Proc. 2000-20, 2000-6 I.R.B. 553. However, as provided above,
if a determination letter application for the plan is filed on or after September 6,
2000, the required plan amendment must be adopted in connection with the
application. In any case, the plan amendment must be effective no later than
January 1, 2002.