[Federal Register Volume 60, Number 241 (Friday, December 15, 1995)]
[Rules and Regulations]
[Pages 64320-64324]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30416]



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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

[TD 8631]
RIN 1545-AT79


Notice of Significant Reduction in the Rate of Future Benefit 
Accrual

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

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SUMMARY: This document contains temporary regulations that provide 
guidance concerning the requirements of section 204(h) of the Employee 
Retirement Income Security Act of 1974, as amended (ERISA), relating to 
defined benefit plans and to individual account plans that are subject 
to the funding standards of section 302 of ERISA. It requires the plan 
administrator to give notice of certain plan amendments to participants 
in the plan and certain other parties. The text of these temporary 
regulations also serves as the text of the proposed regulations set 
forth in the notice of proposed rulemaking on this subject published in 
the Proposed Rules section of this issue of the Federal Register.

EFFECTIVE DATE: December 15, 1995.

FOR FURTHER INFORMATION CONTACT: Betty J. Clary, (202) 622-6070 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    These regulations are being issued without prior notice and public 
procedure pursuant to the Administrative Procedure Act (5 U.S.C. 553). 
For this reason, the collection of information contained in these 
regulations has been reviewed and, pending receipt and evaluation of 
public comments, approved by the Office of Management and Budget under 
control number 1545-1477. Responses to this collection of information 
are required under section 204(h) of ERISA upon the adoption of certain 
amendments to pension plans.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid control number.
    For further information concerning this collection of information, 
and where to submit comments on the collection of information and the 
accuracy of the estimated burden and suggestions for reducing this 
burden, please refer to the preamble to the cross-referencing notice of 
proposed rulemaking published in the Proposed Rules section of this 
issue of the Federal Register.
    The regulations do not involve any issue of confidentiality.

Background

    This document contains temporary regulations that provide guidance 
on section 204(h) of the Employee Retirement Income Security Act of 
1974, as amended (ERISA), 29 U.S.C. 1054(h). Section 204(h) of ERISA 
was added by section 11006(a) of the Single-Employer Pension Plan 
Amendments Act of 1986 (Title XI of Public Law 99-272), and was amended 
by section 1879(u)(1) of the Tax Reform Act of 1986, Public Law 99-514. 
Pursuant to section 101(a) of the Reorganization Plan No. 4 of 1978, 29 
U.S.C. 1001nt, the Secretary of the Treasury has authority to issue 
regulations under parts 2 and 3 of subtitle B of title I of ERISA 
(including section 204 of ERISA). Under section 104 of Reorganization 
Plan No. 4, the Secretary of Labor retains enforcement authority with 
respect to parts 2 and 3 of subtitle B of title I of ERISA, but, in 
exercising such authority, is bound by the regulations issued by the 
Secretary of the Treasury.
    Prior guidance relating to the requirements of section 204(h) has 
been provided in Rev. Proc. 89-65 (1989-2 C.B. 786) and Rev. Proc. 94-
13 (1994-1 C.B. 566), and under Notice 87-21 (1987-1 C.B. 458), Notice 
88-131 (1988-2 C.B. 546), Notice 89-92 (1989-2 C.B. 410), and Notice 
90-73 (1990-2 C.B. 353). These temporary regulations provide further 
guidance, in the form of Questions and Answers.
    The provisions in this Treasury Decision are needed immediately to 
provide guidance to the public with respect to the notice requirements 
of section 204(h) of ERISA. Issues related to section 204(h) arise in 
connection with a broad range of plan amendments, including amendments 
prompted by recent changes in the law. Therefore, it is found 
impracticable and contrary to the public interest to issue this 
Treasury decision with prior notice under 5 U.S.C. 553(b).

Explanation of Provisions

    Section 204(h) of ERISA applies if a defined benefit plan or an 
individual account plan that is subject to the funding standards of 
section 302 of ERISA is amended to provide for a significant reduction 
in the rate of future benefit accrual. It requires the plan 
administrator to give written notice of the amendment to participants 
in the plan, alternate payees, and employee organizations representing 
participants in the plan (or to a person designated, in writing, to 
receive the notice on behalf of a participant, alternate payee, or 
employee organization). The notice must set forth the plan amendment 
and its effective date and must be provided after adoption of the 
amendment and not less than 15 days before the effective date of the 
amendment.
    A plan amendment that is subject to the notice requirements of 
section 204(h) of ERISA may also be subject to additional reporting and 
disclosure requirements under title I of ERISA, 

[[Page 64321]]
such as the requirement to provide a summary of material modifications. 
See sections 102(a) and 104(a) of ERISA, 29 U.S.C. 1022 and 1024, and 
the regulations thereunder for guidance on when a summary of material 
modifications must be provided. Section 204(h) notice must be provided 
at least 15 days in advance of the effective date of an amendment 
significantly reducing the future rate of benefit accrual, even though 
a summary of material modifications describing the amendment is 
provided at a later date.
    Section 204(h) of ERISA does not apply to an amendment that does 
not affect the rate of future benefit accrual. These regulations 
clarify that an amendment to a defined benefit plan that does not 
affect the annual benefit commencing at normal retirement age does not 
affect the rate of future benefit accrual for purposes of section 
204(h). Accordingly, the regulations provide that the plan 
administrator of a defined benefit plan is not required to provide 
section 204(h) notice with respect to an amendment that does not affect 
the future annual benefit payable at normal retirement age, even if the 
amendment affects other forms of payment (such as a single sum 
distribution) or benefits commencing at a date other than normal 
retirement age (such as an early retirement benefit).
    The regulations also clarify that an amendment to an individual 
account plan that does not change the amount of future allocations to 
participants' accounts does not affect the rate of future benefit 
accrual for purposes of section 204(h) of ERISA. Accordingly, section 
204(h) notice is not required with respect to any such amendment.
    Even if an amendment affects the rate of future benefit accrual, 
section 204(h) notice is required only if the amendment significantly 
reduces the rate of future benefit accrual. Under the regulations, 
whether an amendment significantly reduces the rate of future benefit 
accrual is to be determined based on reasonable expectations taking 
into account all relevant facts and circumstances.
    The regulations delegate to the Commissioner of Internal Revenue 
the authority to provide that section 204(h) notice need not be 
provided with respect to plan amendments that the Commissioner 
determines are necessary or appropriate, as a result of a change in 
federal law, to maintain compliance with the law. The Commissioner may 
exercise this authority only through the publication of revenue 
rulings, notices, and other guidance in the Internal Revenue Bulletin.
    In situations in which section 204(h) notice is required with 
respect to an amendment, the regulations provide guidance on the 
participants, alternate payees, and employee organizations to whom the 
notice must be provided. Specifically, the regulations provide that the 
plan administrator is not required to provide notice to a participant 
or alternate payee whose rate of future benefit accrual is reasonably 
expected not to be reduced by the amendment. For example, notice need 
not be provided to participants (such as former employees with a vested 
benefit under the plan) who, prior to the amendment, were not entitled 
to accrue future benefits under the plan. Moreover, under the 
regulations, section 204(h) notice is not required to be provided to an 
employee organization unless it represents one or more participants to 
whom section 204(h) notice is required to be provided. Finally, the 
regulations clarify that employees who have not yet become participants 
in the plan are not taken into account for any purpose under section 
204(h) of ERISA.\1\ Thus, the plan administrator is not required to 
provide section 204(h) notice to such employees.

    \1\ This is not intended to affect the rights of employees under 
other provisions of ERISA.
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    The regulations provide that a plan that is terminated in 
accordance with title IV of ERISA is deemed to satisfy section 204(h) 
not later than the date of termination established under section 4048 
of ERISA. Accordingly, section 204(h) does not require that any further 
benefits accrue under the plan after that date. However, if that date 
of termination is deferred, benefits continue to accrue until the 
deferred date of termination absent an effective cessation of accruals 
as of an earlier specified date.
    If the plan is not amended to significantly reduce the rate of 
future benefit accrual prior to the termination, section 204(h) notice 
is not required. However, the regulations also affirm that section 
204(h) applies to an amendment that is effective prior to the 
termination date and clarify that, if section 204(h) notice is 
required, it can be provided either with or as part of the notice of 
intent to terminate or separately.
    The regulations also provide two rules applicable in situations in 
which a plan administrator was required to provide section 204(h) 
notice with respect to an amendment but failed to provide timely notice 
to some of the parties to whom notice was required to be provided. The 
first rule applies when the plan administrator fails to provide timely 
notice with respect to more than a de minimis percentage of the parties 
to whom section 204(h) notice was required. In such a situation, the 
amendment becomes effective in accordance with its terms with respect 
to a participant to whom notice was required if the participant was 
provided with timely notice and any employee organization representing 
the participant was also provided with timely notice. The amendment 
also becomes effective in accordance with its terms with respect to an 
alternate payee to whom notice was required if the alternate payee was 
provided with timely notice.
    The second rule applies in a situation in which the plan 
administrator made a good faith effort to comply with section 204(h) of 
ERISA with respect to an amendment, failed to provide timely section 
204(h) notice to no more than a de minimis percentage of the parties to 
whom notice was required, and provided timely notice to all employee 
organizations with respect to whom section 204(h) notice was required. 
In such a situation, if the plan administrator, promptly upon discovery 
of the omission, provides section 204(h) notice to all parties who were 
required to be provided such notice but were omitted, the plan 
amendment becomes effective in accordance with its terms with respect 
to all parties to whom section 204(h) notice was required, including 
those who did not receive notice prior to discovery of the omission.

Effective Dates

    These temporary regulations are effective for amendments adopted on 
or after December 15, 1995, and amendments effective by their terms on 
or after January 2, 1996.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in EO 12866. Therefore, a 
regulatory assessment is not required. It also has been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to 
these regulations, and, therefore, a Regulatory Flexibility Analysis is 
not required. Pursuant to section 7805(f) of the Internal Revenue Code, 
these temporary regulations will be submitted to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on their 
impact on small business.

[[Page 64322]]

    Drafting Information: The principal author of these regulations 
is Betty J. Clary, Office of the Associate Chief Counsel (Employee 
Benefits and Exempt Organizations), IRS. However, other personnel 
from the IRS and Treasury Department participated in their 
development.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 602

    Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR parts 1 and 602 are amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 is amended by adding 
an entry for Section 1.411(d)-6T to read as follows:

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

    Section 1.411(d)-6T also issued under Reorganization Plan No. 4 of 
1978, 29 U.S.C. 1001nt. * * *
    Par. 2. Sec. 1.411(d)-6T is added to read as follows:


Sec. 1.411(d)-6T  Section 204(h) notice.

    Q-1: What are the requirements of section 204(h) of the Employee 
Retirement Income Security Act of 1974, as amended (ERISA)?
    A-1: (a) Requirements of section 204(h). Section 204(h) of ERISA 
generally requires written notice of an amendment to certain plans that 
provides for a significant reduction in the rate of future benefit 
accrual. Section 204(h) generally requires the notice to be provided to 
plan participants, alternate payees, and employee organizations. The 
plan administrator must provide the notice after adoption of the plan 
amendment and not less than 15 days before the effective date of the 
plan amendment.
    (b) Other notice requirements. Other provisions of law may require 
that certain parties be notified of a plan amendment. See, for example, 
sections 102 and 104 of ERISA, and the regulations thereunder, for the 
requirements relating to summary plan descriptions and summaries of 
material modifications.
    Q-2: To which plans does section 204(h) of ERISA apply?
    A-2: Section 204(h) of ERISA applies to defined benefit plans 
subject to part 2 of subtitle B of title I of ERISA and to individual 
account plans subject to such part 2 and to the funding standards of 
section 302 of ERISA. Accordingly, individual account plans that are 
not subject to the funding standards of section 302, such as profit-
sharing and stock bonus plans, are not subject to section 204(h).
    Q-3: What is section 204(h) notice?
    A-3: Action 204(h) notice is notice that complies with section 
204(h) of ERISA and the rules in this section.
    Q-4: For which amendments is section 204(h) notice required?
    A-4: (a) In general. Section 204(h) notice is required for an 
amendment to a plan described in Q&A-2 of this section that provides 
for a significant reduction in the rate of future benefit accrual.
    (b) Delegation of authority to Commissioner. The Commissioner of 
Internal Revenue may provide through publication in the Internal 
Revenue Bulletin of revenue rulings, notices, or other documents (see 
Sec. 601.601(d)(2) of this chapter) that section 204(h) notice need not 
be provided for plan amendments otherwise described in paragraph (a) of 
this Q&A-4 that the Commissioner determines to be necessary or 
appropriate, as a result of changes in the law, to maintain compliance 
with the requirements of the Internal Revenue Code of 1986, as amended 
(Code) (including requirements for tax qualification), ERISA, or other 
applicable federal law.
    Q-5: What is an amendment that affects the rate of future benefit 
accrual for purposes of section 204(h) of ERISA?
    A-5: (a) In general--(1) Defined benefit plans. For purposes of 
section 204(h) of ERISA, an amendment to a defined benefit plan affects 
the rate of future benefit accrual only if it is reasonably expected to 
change the amount of the future annual benefit commencing at normal 
retirement age.
    (2) Individual account plans. For purposes of section 204(h), an 
amendment to an individual account plan affects the rate of future 
benefit accrual only if it is reasonably expected to change the amounts 
allocated in the future to participants' accounts. Changes in the 
investments or investment options under an individual account plan are 
not taken into account for this purpose.
    (b) Determination of rate of future benefit accrual. In accordance 
with paragraph (a) of this Q&A-5, the rate of future benefit accrual is 
determined without regard to optional forms of benefit (other than the 
annual benefit described in paragraph (a) of this Q&A-5), early 
retirement benefits, or retirement-type subsidies, within the meaning 
of such terms as used in section 411(d)(6) of the Code (section 204(g) 
of ERISA). The rate of future benefit accrual is also determined 
without regard to ancillary benefits and other rights or features as 
defined in Sec. 1.401(a)(4)-4(e).
    (c) Examples. These examples illustrate the rules in this Q&A-5:

    Example 1. A plan is amended with respect to future benefit 
accruals to eliminate a right to commencement of a benefit prior to 
normal retirement age. Because the amendment does not affect the 
annual benefit commencing at normal retirement age, it does not 
reduce the rate of future benefit accrual for purposes of section 
204(h).
    Example 2. A plan is amended to modify the assumptions used in 
converting an annuity form of distribution to a single sum form of 
distribution. The use of these modified assumptions results in a 
lower single sum. Because the amendment does not affect the annual 
benefit commencing at normal retirement age, it does not reduce the 
rate of future benefit accrual for purposes of section 204(h).

    Q-6: What plan provisions are taken into account in determining 
whether there has been a reduction in the rate of future benefit 
accrual?

    A-6: (a) Plan provisions taken into account. All plan provisions 
that may affect the rate of future benefit accrual of participants or 
alternate payees must be taken into account in determining whether an 
amendment provides for a significant reduction in the rate of future 
benefit accrual. Such provisions include, for example, the dollar 
amount or percentage of compensation on which benefit accruals are 
based; in the case of a plan using the permitted disparity under 
section 401(l) of the Code, the amount of disparity between the excess 
benefit percentage or excess contribution percentage and the base 
benefit percentage or base contribution percentage (all as defined in 
section 401(l)); the definition of service or compensation taken into 
account in determining an employee's benefit accrual; the method of 
determining average compensation for calculating benefit accruals; the 
definition of normal retirement age in a defined benefit plan; the 
exclusion of current participants from future participation; benefit 
offset provisions; minimum benefit provisions; the formula for 
determining the amount of contributions and forfeitures allocated to 
participants' accounts in an individual account plan; and the actuarial 
assumptions used to determine contributions under a target benefit plan 
(as defined in Sec. 1.401(a)(4)-8(b)(3)(i)).

    (b) Plan provisions not taken into account. Plan provisions that do 
not

[[Page 64323]]

affect the rate of future benefit accrual of participants or alternate 
payees are not taken into account in determining whether there has been 
a reduction in the rate of future benefit accrual. For example, 
provisions such as vesting schedules or optional forms of benefit 
(other than the annual benefit described in Q&A-5(a) of this section) 
are not taken into account.
    (c) Examples. The following example illustrates the rules in this 
Q&A-6:

    Example. A defined benefit plan provides a normal retirement 
benefit equal to 50% of final average compensation times a fraction 
(not in excess of one), the numerator of which equals the number of 
years of participation in the plan and the denominator of which 
equals 20. A plan amendment that changes the numerator or 
denominator of that fraction must be taken into account in 
determining whether there has been a reduction in the rate of future 
benefit accrual.

    Q-7: What is the basic principle used in determining whether an 
amendment provides for a significant reduction in the rate of future 
benefit accrual for purposes of section 204(h) of ERISA?
    A-7: Whether an amendment provides for a significant reduction in 
the rate of future benefit accrual for purposes of section 204(h) of 
ERISA is determined based on reasonable expectations taking into 
account the relevant facts and circumstances at the time the amendment 
is adopted.
    Q-8: Are employees who have not yet become participants in a plan 
at the time an amendment to the plan is adopted taken into account for 
any purpose in applying section 204(h) of ERISA with respect to the 
amendment?
    A-8: No. Employees who have not yet become participants in a plan 
at the time an amendment to the plan is adopted are not taken into 
account for any purpose in applying section 204(h) of ERISA with 
respect to the amendment. Thus, if section 204(h) notice is required 
with respect to an amendment, the plan administrator need not provide 
section 204(h) notice to such employees.
    Q-9: If section 204(h) notice is required with respect to an 
amendment, must such notice be provided to participants or alternate 
payees whose rate of future benefit accrual is not reduced by the 
amendment?
    A-9: (a) In general. A plan administrator need not provide section 
204(h) notice to any participant whose rate of future benefit accrual 
is reasonably expected not to be reduced by the amendment, nor to any 
alternate payee under an applicable qualified domestic relations order 
whose rate of future benefit accrual is reasonably expected not to be 
reduced by the amendment. A plan administrator need not provide section 
204(h) notice to an employee organization unless the employee 
organization represents a participant to whom section 204(h) notice is 
required to be provided.
    (b) Facts and circumstances test. Whether a participant or 
alternate payee is described in paragraph (a) of this Q&A-9 is 
determined based on all relevant facts and circumstances at the time 
the amendment is adopted.
    (c) Examples. The following examples illustrate the rules in this 
Q&A-9:

    Example 1. Plan A is amended to reduce significantly the rate of 
future benefit accrual of all current employees who are participants 
in the plan. It is reasonable to expect based on the facts and 
circumstances that the amendment will not reduce the rate of future 
benefit accrual of former employees who are currently receiving 
benefits or that of former employees who are entitled to vested 
benefits. Accordingly, the plan administrator is not required to 
provide section 204(h) notice to such former employees.
    Example 2. Assume in Example 1 that Plan A also covers two 
groups of alternate payees. The alternate payees in the first group 
are entitled to a certain percentage or portion of the former 
spouse's accrued benefit, and for this purpose the accrued benefit 
is determined at the time the former spouse begins receiving 
retirement benefits under the plan. The alternate payees in the 
second group are entitled to a certain percentage or portion of the 
former spouse's accrued benefit, and for this purpose the accrued 
benefit was determined at the time the qualified domestic relations 
order was issued by the court. It is reasonable to expect that the 
benefits to be received by the second group of alternate payees will 
not be affected by any reduction in a former spouse's rate of future 
benefit accrual. Accordingly, the plan administrator is not required 
to provide section 204(h) notice to the alternate payees in the 
second group.
    Example 3. Plan B covers hourly employees and salaried 
employees. Plan B provides the same rate of benefit accrual for both 
groups. The employer amends Plan B to reduce significantly the rate 
of future benefit accrual of the salaried employees only. At that 
time, it is reasonable to expect that only a small percentage of 
hourly employees will become salaried in the future. Accordingly, 
the plan administrator is not required to provide section 204(h) 
notice to the participants who are currently hourly employees.
    Example 4. Plan C covers employees in Division M and employees 
in Division N. Plan C provides the same rate of benefit accrual for 
both groups. The employer amends Plan C to reduce significantly the 
rate of future benefit accrual of employees in Division M. At that 
time, it is reasonable to expect that in the future only a small 
percentage of employees in Division N will be transferred to 
Division M. Accordingly, the plan administrator is not required to 
provide section 204(h) notice to the participants who are employees 
in Division N.
    Example 5. Assume the same facts as in Example 4, except that at 
the time the amendment is adopted, it is expected that soon 
thereafter Division N will be merged into Division M in connection 
with a corporate reorganization (and the employees in Division N 
will become subject to the plan's amended benefit formula applicable 
to the employees in Division M). In this instance, the plan 
administrator must provide section 204(h) notice to the participants 
who are employees in Division M and to the participants who are 
employees in Division N.

    Q-10: Does a notice fail to comply with section 204(h) of ERISA if 
it contains a summary of the amendment and the effective date, without 
the text of the amendment itself?
    A-10: No, the notice does not fail to comply with section 204(h) of 
ERISA merely because the notice contains a summary of the amendment, 
rather than the text of the amendment, if the summary is written in a 
manner calculated to be understood by the average plan participant and 
contains the effective date. The summary need not explain how the 
individual benefit of each participant or alternate payee will be 
affected by the amendment.
    Q-11: How may section 204(h) notice be provided?
    A-11: A plan administrator may use any method reasonably calculated 
to ensure actual receipt of the section 204(h) notice. First class mail 
to the last known address of the party is an acceptable delivery 
method. Likewise, hand delivery is acceptable. Section 204(h) notice 
may be enclosed along with other notice provided by the employer or 
plan administrator.
    Q-12: If a plan administrator fails to provide section 204(h) 
notice to more than a de minimis percentage of participants and 
alternate payees to whom section 204(h) notice is required to be 
provided, will the plan administrator be considered to have complied 
with section 204(h) of ERISA with respect to participants and alternate 
payees who were provided with timely section 204(h) notice?
    A-12: The plan administrator will be considered to have complied 
with section 204(h) of ERISA with respect to a participant to whom 
section 204(h) notice is required to be provided if the participant and 
any employee organization representing the participant were provided 
with timely section 204(h) notice. The plan administrator will be 
considered to have complied with section 204(h) with respect to an 
alternate payee to whom section 204(h) notice is required to be 
provided if the alternate payee was 

[[Page 64324]]
provided with timely section 204(h) notice. Accordingly, the amendment 
will become effective in accordance with its terms with respect to 
those participants and alternate payees.
    Q-13: Will a plan be considered to have complied with section 
204(h) of ERISA if the plan administrator provides section 204(h) 
notice to all but a de minimis percentage of participants and alternate 
payees to whom section 204(h) notice must be provided?
    A-13: The plan will be considered to have complied with section 
204(h) of ERISA and the amendment will become effective in accordance 
with its terms with respect to all parties to whom section 204(h) 
notice was required to be provided (including those who did not receive 
notice prior to discovery of the omission), if the plan administrator--
    (a) Has made a good faith effort to comply with the requirements of 
section 204(h);
    (b) Has provided section 204(h) notice to each employee 
organization that represents any participant to whom section 204(h) 
notice is required to be provided;
    (c) Has failed to provide section 204(h) notice to no more than a 
de minimis percentage of participants and alternate payees to whom 
section 204(h) notice is required to be provided; and
    (d) Provides section 204(h) notice to those participants and 
alternate payees promptly upon discovering the oversight.
    Q-14: How does section 204(h) of ERISA apply to a plan that is 
terminated in accordance with title IV of ERISA?
    A-14: (a) On and after termination date. Notwithstanding paragraph 
(b) of this Q&A-14 or any other provisions of this section, a plan that 
is terminated in accordance with title IV of ERISA is deemed to have 
satisfied section 204(h) of ERISA not later than the termination date 
(or date of termination, as applicable) established under section 4048 
of ERISA. Accordingly, section 204(h) would not require that any 
additional benefits accrue after such date.
    (b) Amendment effective before termination date. An amendment that 
is effective before the termination date (or date of termination, as 
applicable) established under section 4048 of ERISA is subject to 
section 204(h). Accordingly, if such amendment provides for a 
significant reduction in the rate of future benefit accrual, the plan 
administrator must provide section 204(h) notice (either separately or 
with or as part of the notice of intent to terminate) with respect to 
the amendment. However, if a plan is not amended to reduce 
significantly the rate of future benefit accrual before the termination 
date (for example, the plan continues existing benefit accruals until 
the termination date), section 204(h) notice is not required.
    Q-15: When does section 204(h) of ERISA become effective?
    A-15: (a) Statutory effective date. With respect to defined benefit 
plans, section 204(h) of ERISA generally applies to plan amendments 
adopted on or after January 1, 1986. With respect to individual account 
plans, section 204(h) applies to plan amendments adopted on or after 
October 22, 1986.
    (b) Regulatory effective date. This section applies to amendments 
adopted on or after December 15, 1995, and amendments effective by 
their terms on or after January 2, 1996.

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

    Par. 6. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.

    Par. 7. In Sec. 602.101, paragraph (c) is amended by adding to the 
table in numerical order the entry ``1.411(d)-6T * * * .1545-1477''.
Margaret Milner Richardson,
Commissioner of Internal Revenue.

    Approved: December 5, 1995.
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 95-30416 Filed 12-12-95; 1:23 pm]
BILLING CODE 4830-01-U