[Federal Register Volume 68, Number 136 (Wednesday, July 16, 2003)]
[Rules and Regulations]
[Pages 41906-41911]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-17869]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

[TD 9076]
RIN 1545-AX34


Special Rules Under Section 417(a)(7) for Written Explanations 
Provided by Qualified Retirement Plans After Annuity Starting Dates

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations relating to the 
special rule added by the Small Business Job Protection Act of 1996 
which permits the required written explanations of certain benefits to 
be provided by qualified retirement plans to plan participants after 
the annuity starting date. These final regulations affect sponsors and 
administrators of qualified retirement plans, and participants in those 
plans.

DATES: Effective Date: These regulations are effective July 16, 2003.
    Applicability Date: These regulations apply to plan years beginning 
on or after January 1, 2004.

FOR FURTHER INFORMATION CONTACT: Robert Walsh (202) 622-6090 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in these final regulations 
has been reviewed and approved by the Office of Management and Budget 
in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507(d)) under control number 1545-1724.
    The collection of information in this final regulation is in Sec.  
1.417(e)-1(b)(3)(iv)(B) and Sec.  1.417(e)-1(b)(3)(v)(A). This 
collection of information is required by the IRS to ensure that the 
participant and the participant's spouse consent to a form of 
distribution from a qualified retirement plan that may result in 
reduced periodic payments.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be sent to the Internal 
Revenue Service, Attn: IRS Reports Clearance Officer, W:CAR:MP:T:T:SP, 
Washington, DC 20224, and to the Office of Management and Budget, Attn: 
Desk Officer for the Department of the Treasury, Office of Information 
and Regulatory Affairs, Washington, DC 20503.
    Books or records relating to a collection of information must be 
retained as long as their contents might become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background

    This document contains amendments to 26 CFR part 1 under section 
417(a)(7). On January 17, 2001, a notice of proposed rulemaking (REG-
109481-99) was published in the Federal Register (66 FR 3916) under 
section 417(a)(7) of the Internal Revenue Code. No public hearing was 
requested or held. Written comments responding to the notice of 
proposed rulemaking were received. After consideration of all the 
comments, the proposed regulations are adopted as amended by this 
Treasury decision.
    Section 401(a)(11) of the Internal Revenue Code provides that, 
subject to certain exceptions, all distributions from a qualified plan 
must be made in the form of a qualified joint and survivor annuity 
(QJSA). One such exception is provided in section 417, which allows a 
participant to elect to waive the QJSA in favor of another form of 
distribution. Section 417(a)(2) provides that, for the waiver to be 
valid, the participant's spouse must consent to the waiver. Section 
417(a)(3)(A) requires a qualified plan to provide to each participant, 
within a reasonable period of time before the annuity starting date, a 
written explanation (QJSA explanation) that describes the QJSA, the 
right to waive the QJSA, and the rights of the participant's spouse.
    Section 417(a)(7), which was added to the Code by section 1451(a) 
of the Small Business Job Protection Act of 1996,

[[Page 41907]]

Public Law 104-188 (110 Stat. 1755) (SBJPA), creates an exception to 
the rules of section 417(a)(3)(A), effective for plan years beginning 
after December 31, 1996. Section 417(a)(7)(A) provides that, 
notwithstanding any other provision of section 417(a), a plan may 
furnish the QJSA explanation after the annuity stating date, as long as 
the applicable election period is extended for at least 30 days after 
the date on which the explanation is furnished. Thus, section 
417(a)(7)(A) allows the annuity starting date to be a date that is 
earlier than the date the QJSA explanation is provided, thereby 
allowing the retroactive payment of benefits that are attributable to 
the period before the QJSA explanation is provided. Section 
417(a)(7)(A)(ii) provides that the Secretary may limit the application 
of the provision permitting the selection of a retroactive annuity 
starting date by regulations, except that the regulations may not limit 
the period of time by which the annuity starting date precedes the 
furnishing of the written explanation other than by providing that the 
retroactive annuity starting date may not be earlier than termination 
of employment.
    Section 205(c)(8) of the Employee Retirement Income Security Act of 
1974, Public Law 93-406 (88 Stat. 829) (ERISA), provides a parallel 
rule to section 417(a)(7) of the Code that applies under Title I of 
ERISA, and authorizes the Secretary of the Treasury to issue 
regulations limiting the application of the general rule. Thus, 
Treasury regulations issued under section 417(a)(7) of the Code apply 
as well for purposes of section 205(c)(8) of ERISA.

Explanation of Provisions

    In accordance with section 417(a)(7)(A), these regulations provide 
that the QJSA explanation may be furnished on or after the annuity 
starting date under certain circumstances. The regulations refer to the 
annuity starting date in such cases as the ``retroactive annuity 
starting date'', define how payments are made in the case of a 
retroactive annuity starting date, and set conditions for the use of a 
retroactive annuity starting date.
    Like the proposed regulations, the final regulations provide that a 
retroactive annuity starting date may be used only if the plan provides 
for it and the participant affirmatively elects to use the retroactive 
annuity starting date. If a participant affirmatively elects a 
retroactive annuity starting date, the participant must be put in 
approximately the same situation he or she would have been in had 
benefit payments actually commenced on the retroactive annuity starting 
date. Accordingly, in the case where a participant affirmatively elects 
a retroactive annuity starting date, the plan benefits must be 
determined as of that retroactive annuity starting date (including the 
application of section 415 and, if applicable, section 417(e)(3) as of 
that retroactive annuity starting date). If the plan benefits are 
determined in that manner, future periodic payments for a participant 
who elects a retroactive annuity starting date will be the same as the 
periodic payments that would have been paid to the participant had 
payments actually commenced on the retroactive annuity starting date. 
In addition, the participant must receive a make-up amount to reflect 
any missed payments (with an appropriate adjustment for interest from 
the date the payments would have been made to the date of actual 
payment).
    Several commentators suggested that an adjustment for interest 
should not be required where the period between the retroactive annuity 
starting date and the date payments begin was less than three or four 
months. It was argued that the requirement of an interest adjustment in 
such a case may create burdens for the plan that are more significant 
that the additional money that may be paid to the participant. The 
Treasury Department and the IRS continue to believe that an appropriate 
adjustment for interest is needed for make-up payments. Thus, the final 
regulations retain the rule that an appropriate adjustment is required 
for make-up payments. The extent to which an adjustment is appropriate 
for a particular make-up payment depends on the facts and circumstances 
related to that payment.
    The final regulations retain the rules from the proposed 
regulations that provide that the notice, consent, and election rules 
of section 417(a)(1), (2), and (3) apply to the retroactive payment of 
benefits but with several modifications. These modifications generally 
reflect the fact that the existing timing rules relating to notice and 
consent are generally determined with reference to an annuity starting 
date that is after the furnishing of the QJSA explanation by a period 
of up to 90 days.\1\ If legislation currently pending in Congress 
changing the 90-day QJSA election period to 180 days is enacted, it is 
anticipated that the regulations will be modified to reflect that 
change.
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    \1\ For example, section 417(a)(1) provides that a participant 
may elect to waive the QJSA within the ``applicable election 
period'' which is defined by section 417(a)(6) as the 90-day period 
ending on the annuity starting date. Similarly, Sec.  1.417(e)-
1(b)(3)(i) provides that the written consent of the plan participant 
and the participant's spouse must be made no more than 90 days 
before the annuity starting date. Also, Sec.  1.417(e)-1(b)(3)(ii) 
provides that the QJSA explanation must generally be provided no 
less than 30 days and no more than 90 days before the annuity 
starting date.
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    The final regulations also retain the special spousal consent rule 
provided for under the proposed regulations. Under this special rule, 
the participant's spouse as of the time distributions actually commence 
must consent to the retroactive annuity starting date election, if the 
survivor payments under the retroactive annuity are less than under a 
QJSA with an annuity starting date after the date the QJSA explanation 
was provided. This special rule applies even if the form of benefit 
that the participant elects as of the retroactive annuity starting date 
is a QJSA. Thus, for example, where a QJSA that begins after the QJSA 
explanation is furnished would provide $1,000 monthly to the 
participant with a survivor annuity of $500 monthly to the spouse, and 
a QJSA with a retroactive annuity starting date would provide $900 
monthly to the participant with a survivor annuity of $450 monthly to 
the spouse, together with a $20,000 make-up payment to the participant, 
the participant would be required to obtain the consent of the current 
spouse in order to elect the retroactive annuity starting date. Spousal 
consent would be required in this example because the spouse has a 
statutory entitlement to a survivor benefit of at least $500 per month 
under a QJSA with a current annuity starting date.
    Various comments were received regarding this spousal consent 
requirement. For example, it was suggested that spousal consent should 
not be required in the cases of short delay if the QJSA form is 
elected, or where the survivor benefit under the retroactive annuity 
starting date is at least 95% of the survivor annuity payable under a 
current QJSA, because requiring consent in such a case would create 
additional work and confusion and result in little benefit to the 
spouse. The regulations are not changed in this regard, as the Treasury 
Department and the IRS believe that spousal protection cannot be 
diminished below the statutorily prescribed QJSA without spousal 
consent. However, these regulations provide that such consent is only 
necessary where the survivor annuity is less than 50% of the amount of 
the annuity payable during the life of the participant under a 
currently commencing QJSA. Thus, in the

[[Page 41908]]

example provided above, if the participant elected a QJSA with a 
retroactive annuity starting date and a 66\2/3%\ survivor annuity, the 
QJSA would provide $840 monthly to the participant with a survivor 
annuity of $560 to the participant's spouse and a make-up payment of 
$18,666. Spousal consent is not required in such a case because the 
$560 survivor annuity exceeds the minimum permissible under a currently 
commencing QJSA.
    The proposed regulations impose an additional condition on the 
availability of a retroactive annuity starting date, regarding the 
permissible amount of the distribution under sections 417(e)(3) (if 
applicable) and 415. To satisfy this condition, the distribution must 
be adjusted, if necessary, to satisfy the requirements of sections 
417(e)(3) (if applicable) and 415 where the date the distribution 
commences is substituted for the annuity starting date.
    Several comments raised concerns regarding the requirement that 
sections 415 and 417(e)(3) be satisfied as of the date of distribution 
as well as the retroactive annuity starting date. Some commentators 
suggested that testing whether the distributions satisfy section 415 as 
of the date of distribution could be particularly restrictive for 
multiemployer plans. The commentators noted, for example, that for a 
participant who left covered service under a multiemployer plan at age 
60 and retires at age 68 under a plan with an age-62 normal retirement 
age, the amount payable in the year of benefit commencement, as 
calculated for purposes of section 415, could well be higher than 100% 
of that participant's average compensation for his high three years and 
thus would violate section 415.\2\
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    \2\ After the comments relating to multiemployer plans were 
received, section 415(b)(11) was amended by the Economic Growth and 
Tax Relief Reconciliation Act of 2001, Public Law No. 107-16, to 
provide that the 100% test of section 415(b)(1)(B) no longer applies 
to multiemployer plans.
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    The IRS and Treasury Department believe this second test is 
generally needed to stop participants from using the retroactive 
annuity starting date as a means of receiving benefits in excess of the 
section 415 limits. However, the IRS and Treasury Department have 
weighed the importance of compliance with this requirement against the 
associated burdens and have concluded that testing for section 415 
compliance as of the date distributions commence may not be needed in 
every case. Thus, the final regulations do not apply the requirement 
that satisfaction of the benefit limitations of section 415 be 
demonstrated as of the date distributions commence in the case of a 
distribution that commences no more than twelve months after the 
retroactive annuity starting date, unless the form of benefit (as of 
the retroactive annuity starting date) is a form of benefit subject to 
the valuation rules of section 417(e)(3). For example, in the case of a 
life annuity distribution, compliance with section 415 need not be 
demonstrated as of the date of distribution where that date is no more 
than twelve months after the retroactive annuity starting date. 
However, if the distribution were a single sum distribution, compliance 
with section 415 would need to be tested as of the actual commencement 
date.
    Some commentators also objected to the rule in the proposed 
regulation that required the plan to comply with the valuation rules of 
section 417(e)(3) as of the date of distribution. The IRS and Treasury 
Department continue to believe that a participant should not be 
receiving a smaller lump sum through the election of a retroactive 
annuity starting date than would be available for a current annuity 
starting date. Accordingly, these regulations adopt the rules of the 
proposed regulations regarding the requirements of section 417(e)(3) 
with a clarification relating to the application of section 417(e)(3). 
Under this clarification, in the case of a form of benefit that would 
have been subject to section 417(e)(3) if distributions had commenced 
as of the retroactive annuity starting date, the distribution pursuant 
to a retroactive annuity starting date election must be no less than 
the distribution produced by applying the applicable interest rate and 
the applicable mortality table determined as of the date the 
distribution commences to the annuity form that corresponds to the 
annuity form that was used to determine the benefit amount as of the 
retroactive annuity starting date. Thus, for example, if a distribution 
paid pursuant to an election of a retroactive annuity starting date is 
a single-sum distribution that is based on the present value of the 
straight life annuity payable at normal retirement age, then the amount 
of the distribution must be no less than the present value of the 
annuity payable at normal retirement age, determined as of the 
distribution date using the applicable mortality table and applicable 
interest rate that apply as of the distribution date. Likewise, if a 
distribution paid pursuant to an election of a retroactive annuity 
starting date is a single-sum distribution that is based on the present 
value of the early retirement annuity payable as of the retroactive 
annuity starting date, then the amount of the distribution must be no 
less than the present value of the early retirement annuity payable as 
of the distribution date, determined as of the distribution date using 
the applicable mortality table and applicable interest rate that apply 
as of the distribution date.
    The final regulations retain the rule of the proposed regulations 
that the determination of whether the valuation rules of section 
417(e)(3) apply is based upon the benefit form as of the retroactive 
annuity starting date. Accordingly, a distribution option that is a 
non-decreasing benefit under Sec.  1.417(e)-1(d)(6) does not become 
subject to the valuation rules of section 417(e)(3) merely because of 
the make-up payments for the period between the retroactive annuity 
starting date and the date distributions actually commence.
    Similarly, the final regulations provide that annuity payments that 
otherwise satisfy the requirements for a QJSA under section 417(b) will 
not fail to be treated as a QJSA for purposes of section 415(b)(2)(B) 
because a retroactive annuity starting date is elected and a make-up 
payment is made. Further, to address concerns raised by commentators, 
these regulations provide that plan distributions may be considered to 
be a series of substantially equal periodic payments for purposes of 
section 72(t)(2)(A)(iv) even though the plan distributes a make-up 
payment to a participant who has elected a retroactive annuity starting 
date.
    One commentator suggested that make-up payments made pursuant to a 
retroactive annuity starting date should be considered to be part of a 
series of substantially equal periodic payments for purposes of the 
eligible rollover distribution definition of section 402(c)(4)(A). 
However, these regulations do not address this issue. Section 1.402(c)-
2, Q&A-6 provides that an adjustment in a payment that is part of a 
series of substantially equal periodic payments will be treated as part 
of the series of substantially equal periodic payments for purposes of 
section 402(c)(4)(A) where the adjustment was due solely to reasonable 
administrative error or delay. To ensure that any rule applicable to 
make-up payments under this regulation is consistent with the rules 
generally applicable to independent payments under Q&A-6, the IRS and 
Treasury Department anticipate reviewing these rules and issuing 
guidance.
    Two commentators suggested that defined contribution plans should 
be allowed to adopt provisions for

[[Page 41909]]

retroactive annuity starting dates. One of these commentators suggests 
that the proposed regulations would prohibit a defined contribution 
plan from making payments to cover amounts that were unpaid due to an 
administrative oversight. This commentator adds that such a prohibition 
may cause the plan to fail to provide required distributions under 
section 401(a)(9). The IRS and Treasury Department continue to believe 
that the rules applicable to retroactive annuity starting dates are 
relevant only to defined benefit plans because the benefit provided by 
a defined contribution plan is equal to the account balance and the 
concerns addressed in these regulations are generally not relevant in 
such a case. Moreover, the problem raised by the commentator appears to 
relate to an administrative delay in making a payment (which is an 
issue covered under Sec.  1.401(a)-20, A-10(b)(3)), rather than the 
topic of these regulations. In any event, a plan must provide all 
distributions required by section 401(a)(9) and these regulations do 
not affect that requirement.
    One commentator noted that some plans currently allow retroactive 
annuity starting dates in reliance upon a good faith interpretation of 
the statute and existing regulations. This commentator suggested that 
some of the sponsors of these plans may not wish to provide retroactive 
annuity starting dates in light of these regulations and requested that 
the IRS and Treasury Department confirm that plan sponsors who 
currently allow retroactive annuity starting dates will not violate the 
anti-cutback rules of section 411(d)(6) if they choose to amend these 
plans to restrict the availability of retroactive annuity starting 
dates in the future. The issues raised in this comment are not 
addressed in this Treasury decision. It is anticipated that such plan 
amendments will be governed by regulations to be issued under section 
411(d)(6) pursuant to section 645 of the Economic Growth and Tax Relief 
Reconciliation Act of 2001, Public Law 107-16 (115 Stat. 117).

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It is hereby 
certified that these regulations will not have a significant economic 
impact on a substantial number of small entities. This certification is 
based on the fact that the regulations require the collection of plan 
participants' written elections requesting qualified retirement plan 
distributions, and written spousal consent to these distributions, 
under limited circumstances. It is anticipated that most small 
businesses affected by these regulations will be sponsors of qualified 
retirement plans. Since these written participant elections and written 
spousal consents are required to be collected only for certain 
distributions, and since, in the case of a small plan, there will be 
relatively few distributions per year (and even fewer that are subject 
to these requirements), small plans that provide distributions for 
which this collection of information is required will only have to 
collect a small number of participant elections and spousal consents as 
a result of these regulations. Accordingly, a Regulatory Flexibility 
Analysis is not required. Pursuant to section 7805(f) of the Internal 
Revenue Code, the notice of proposed rulemaking preceding these 
regulations was submitted to the Small Business Administration for 
comment on its impact on small business.

Drafting Information

    The principal authors of these regulations are Robert M. Walsh and 
Linda S. F. Marshall, Office of Division Counsel/Associate Chief 
Counsel (Tax Exempt and Government Entities). However, other personnel 
from the IRS and Treasury 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

0
Accordingly, 26 CFR parts 1 and 602 are amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read, in 
part, as follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 1.417(e)-1(b)(3) also issued under 26 U.S.C. 
417(a)(7)(A)(ii); * * *


0
Par. 2. Section 1.417(e)-1 is amended by:
0
1. Revising paragraphs (b)(3)(i), (b)(3)(ii) introductory text, and 
(b)(3)(ii)(C).

0
2. Redesignating paragraphs (b)(3)(iii) and (b)(3)(iv) as paragraphs 
(b)(3)(viii) and (b)(3)(ix), respectively.

0
3. Adding new paragraphs (b)(3)(iii) through (b)(3)(vii).
    The additions and revisions read as follows:


1.417(e)-1  Restrictions and valuations of distributions from plans 
subject to sections 401(a)(11) and 417.

* * * * *
    (b) * * *
    (3) * * * (i) Written consent of the participant and the 
participant's spouse to the distribution must be made not more than 90 
days before the annuity starting date, and, except as otherwise 
provided in paragraphs (b)(3)(iii) and (b)(3)(iv) of this section, no 
later than the annuity starting date.
    (ii) A plan must provide participants with the written explanation 
of the QJSA required by section 417(a)(3) no less than 30 days and no 
more than 90 days before the annuity starting date, except as provided 
in paragraph (b)(3)(iv) of this section regarding retroactive annuity 
starting dates. However, if the participant, after having received the 
written explanation of the QJSA, affirmatively elects a form of 
distribution and the spouse consents to that form of distribution (if 
necessary), a plan will not fail to satisfy the requirements of section 
417(a) merely because the written explanation was provided to the 
participant less than 30 days before the annuity starting date, 
provided that the following conditions are met:
* * * * *
    (C) The annuity starting date is after the date that the 
explanation of the QJSA is provided to the participant.
* * * * *
    (iii) The plan may permit the annuity starting date to be before 
the date that any affirmative distribution election is made by the 
participant (and before the date that distribution is permitted to 
commence under paragraph (b)(3)(ii)(D) of this section), provided that, 
except as otherwise provided in paragraph (b)(3)(vii) of this section 
regarding administrative delay, distributions commence not more than 90 
days after the explanation of the QJSA is provided.
    (iv) Retroactive annuity starting dates. (A) Notwithstanding the 
requirements of paragraphs (b)(3)(i) and (ii) of this section, pursuant 
to section 417(a)(7), a defined benefit plan is permitted to provide 
benefits based on a retroactive annuity starting date if the 
requirements described in paragraph (b)(3)(v) of this section are 
satisfied. A defined benefit plan is not required to provide for 
retroactive annuity starting dates. If a plan does provide for a 
retroactive annuity starting date, it may impose conditions on the 
availability of a

[[Page 41910]]

retroactive annuity starting date in addition to those imposed by 
paragraph (b)(3)(v) of this section, provided that imposition of those 
additional conditions does not violate any of the rules applicable to 
qualified plans. For example, a plan that includes a single sum payment 
as a benefit option may limit the election of a retroactive annuity 
starting date to those participants who do not elect the single sum 
payment. A defined contribution plan is not permitted to have a 
retroactive annuity starting date.
    (B) For purposes of this section, a ``retroactive annuity starting 
date'' is an annuity starting date affirmatively elected by a 
participant that occurs on or before the date the written explanation 
required by section 417(a)(3) is provided to the participant. In order 
for a plan to treat a participant as having elected a retroactive 
annuity starting date, future periodic payments with respect to a 
participant who elects a retroactive annuity starting date must be the 
same as the future periodic payments, if any, that would have been paid 
with respect to the participant had payments actually commenced on the 
retroactive annuity starting date. The participant must receive a make-
up payment to reflect any missed payment or payments for the period 
from the retroactive annuity starting date to the date of the actual 
make-up payment (with an appropriate adjustment for interest from the 
date the missed payment or payments would have been made to the date of 
the actual make-up payment). Thus, the benefit determined as of the 
retroactive annuity starting date must satisfy the requirements of 
sections 417(e)(3), if applicable, and section 415 with the applicable 
interest rate and applicable mortality table determined as of that 
date. Similarly, a participant is not permitted to elect a retroactive 
annuity starting date that precedes the date upon which the participant 
could have otherwise started receiving benefits (e.g., in the case of 
an ongoing plan, the earlier of the participant's termination of 
employment or the participant's normal retirement age) under the terms 
of the plan in effect as of the retroactive annuity starting date. A 
plan does not fail to treat a participant as having elected a 
retroactive annuity starting date as described in this paragraph 
(b)(3)(iv)(B) merely because the distributions are adjusted to the 
extent necessary to satisfy the requirements of paragraph (b)(3)(v)(B) 
and (C) of this section relating to sections 415 and 417(e)(3).
    (C) If the participant's spouse as of the retroactive annuity 
starting date would not be the participant's spouse determined as if 
the date distributions commence was the participant's annuity starting 
date, consent of that former spouse is not needed to waive the QJSA 
with respect to the retroactive annuity starting date, unless otherwise 
provided under a qualified domestic relations order (as defined in 
section 414(p)).
    (D) A distribution payable pursuant to a retroactive annuity 
starting date election is treated as excepted from the present value 
requirements of paragraph (d) of this section under paragraph (d)(6) of 
this section if the distribution form would have been described in 
paragraph (d)(6) of this section had the distribution actually 
commenced on the retroactive annuity starting date. Similarly, annuity 
payments that otherwise satisfy the requirements of a QJSA under 
section 417(b) will not fail to be treated as a QJSA for purposes of 
section 415(b)(2)(B) merely because a retroactive annuity starting date 
is elected and a make-up payment is made. Also, for purposes of section 
72(t)(2)(A)(iv), a distribution that would otherwise be one of a series 
of substantially equal periodic payments will be treated as one of a 
series of substantially equal periodic payments notwithstanding the 
distribution of a make-up payment provided for in paragraph 
(b)(3)(iv)(B) of this section.
    (E) The following example illustrates the application of paragraph 
(b)(3)(iv)(D) of this section:

    Example. Under the terms of a defined benefit plan, participant 
A is entitled to a QJSA with a monthly payment of $1,500 beginning 
as of his annuity starting date. Due to administrative error, the 
QJSA explanation is provided to A after the annuity starting date. 
After receiving the QJSA explanation A elects a retroactive annuity 
starting date. Pursuant to this election, A begins to receive a 
monthly payment of $1,500 and also receives a make-up payment of 
$10,000. Under these circumstances the monthly payments may be 
treated as a QJSA for purposes of section 415(b)(2)(B). In addition, 
the monthly payments of $1,500 and the make-up payment of $10,000 
may be treated as part of as series of substantially equal periodic 
payments for purpose of section 72(t)(2)(A)(iv).

    (v) Requirements applicable to retroactive annuity starting dates. 
A distribution is permitted to have a retroactive annuity starting date 
with respect to a participant's benefit only if the following 
requirements are met:
    (A) The participant's spouse (including an alternate payee who is 
treated as the spouse under a qualified domestic relations order 
(QDRO), as defined in section 414(p)), determined as if the date 
distributions commence were the participant's annuity starting date, 
consents to the distribution in a manner that would satisfy the 
requirements of section 417(a)(2). The spousal consent requirement of 
this paragraph (b)(3)(v)(A) is satisfied if such spouse consents to the 
distribution under paragraph (b)(2)(i) of this section. The spousal 
consent requirement of this paragraph (b)(3)(v)(A) does not apply if 
the amount of such spouse's survivor annuity payments under the 
retroactive annuity starting date election is no less than the amount 
that the survivor payments to such spouse would have been under an 
optional form of benefit that would satisfy the requirements to be a 
QJSA under section 417(b) and that has an annuity starting date after 
the date that the explanation was provided.
    (B) The distribution (including appropriate interest adjustments) 
provided based on the retroactive annuity starting date would satisfy 
the requirements of section 415 if the date the distribution commences 
is substituted for the annuity starting date for all purposes, 
including for purposes of determining the applicable interest rate and 
the applicable mortality table. However, in the case of a form of 
benefit that would have been excepted from the present value 
requirements of paragraph (d) of this section under paragraph (d)(6) of 
this section if the distribution had actually commenced on the 
retroactive annuity starting date, the requirement to apply section 415 
as of the date distribution commences set forth in this paragraph 
(b)(3)(v)(B) does not apply if the date distribution commences is 
twelve months or less from the retroactive annuity starting date.
    (C) In the case of a form of benefit that would have been subject 
to section 417(e)(3) and paragraph (d) of this section if distributions 
had commenced as of the retroactive annuity starting date, the 
distribution is no less than the benefit produced by applying the 
applicable interest rate and the applicable mortality table determined 
as of the date the distribution commences to the annuity form that 
corresponds to the annuity form that was used to determine the benefit 
amount as of the retroactive annuity starting date. Thus, for example, 
if a distribution paid pursuant to an election of a retroactive annuity 
starting date is a single-sum distribution that is based on the present 
value of the straight life annuity payable at normal retirement age, 
then the amount of the distribution must be no less than the present 
value of the annuity payable at normal retirement age, determined as of 
the distribution date using the applicable mortality table and 
applicable interest rate that apply as of the distribution date. 
Likewise, if a distribution paid pursuant to an election

[[Page 41911]]

of a retroactive annuity starting date is a single-sum distribution 
that is based on the present value of the early retirement annuity 
payable as of the retroactive annuity starting date, then the amount of 
the distribution must be no less than the present value of the early 
retirement annuity payable as of the distribution date, determined as 
of the distribution date using the applicable mortality table and 
applicable interest rate that apply as of the distribution date.
    (vi) Timing of notice and consent requirements in the case of 
retroactive annuity starting dates. In the case of a retroactive 
annuity starting date, the date of the first actual payment of benefits 
based on the retroactive annuity starting date is substituted for the 
annuity starting date for purposes of satisfying the timing 
requirements for giving consent and providing an explanation of the 
QJSA provided in paragraphs (b)(3)(i) and (ii) of this section, except 
that the substitution does not apply for purposes of paragraph 
(b)(3)(iii) of this section. Thus, the written explanation required by 
section 417(a)(3)(A) must generally be provided no less than 30 days 
and no more than 90 days before the date of the first payment of 
benefits and the election to receive the distribution must be made 
after the written explanation is provided and on or before the date of 
the first payment. Similarly, the written explanation may also be 
provided less than 30 days prior to the first payment of benefits if 
the requirements of paragraph (b)(3)(ii) of this section would be 
satisfied if the date of the first payment is substituted for the 
annuity starting date.
    (vii) Administrative delay. A plan will not fail to satisfy the 90-
day timing requirements of paragraphs (b)(3)(iii) and (vi) of this 
section merely because, due solely to administrative delay, a 
distribution commences more than 90 days after the written explanation 
of the QJSA is provided to the participant.
* * * * *

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

0
Par. 3. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.

0
Par. 4. In Sec.  602.101, paragraph (b) is amended by adding the 
following entry in numerical order to the table to read as follows:


Sec.  602.101  OMB Control numbers.

* * * * *
    (b) * * *

------------------------------------------------------------------------
                                                            Current OMB
   CFR part or section where identified and described       control No.
------------------------------------------------------------------------
 
                                * * * * *
  1.417(e)-1............................................       1545-1724
                                * * * * *
------------------------------------------------------------------------


Robert E. Wenzel,
Deputy Commissioner for Services and Enforcement.
    Approved: July 9, 2003.
Pamela Olson,
Assistant Secretary of the Treasury.
[FR Doc. 03-17869 Filed 7-15-03; 8:45 am]
BILLING CODE 4830-01-P