Part I. Rulings — Internal Revenue Bulletin 1996-3

of solvency commensurate with their financial and fiduciary responsibilities.

Under the general net worth requirement, nonbank trustees and custodians may not accept new accounts unless their net worth exceeds the greater of $100,000 or four percent of the value of all assets held in fiduciary accounts. Additionally, nonbank trustees and custodians must take whatever steps are necessary (including the relinquishment of fiduciary accounts) to ensure that their net worth exceeds the greater of $50,000 or two percent of the value of all assets held by them in fiduciary accounts.

For passive nonbank trustees and custodians (qualified nonbank entities that have no discretion to direct the investment of assets), the percentage requirements are lower. Specifically, passive nonbank trustees and custodians may not accept new accounts unless their net worth exceeds the greater of $100,000 or two percent of the value of all assets held in fiduciary accounts. Additionally, they must take appropriate action (including the relinquishment of fiduciary accounts) to ensure that their net worth exceeds the greater of $50,000 or one percent of the value of assets held in their fiduciary accounts.

The proposed and temporary regulations provide a special rule for passive nonbank trustees and custodians that are broker-dealers and members of the Securities Investor Protection Corporation (SIPC). The proposed and temporary regulations provide that, to the extent that assets held in any fiduciary accounts are insured by SIPC in the event of the member’s liquidation ($500,000 per account, $100,000 of which may be cash), the assets will be disregarded in determining the value of assets held in fiduciary accounts by the trustee or custodian for purposes of the percentage part of the net worth requirement.

The final regulations adopt the provisions of the proposed and temporary regulations. In addition, in response to comments, the final regulations extend the SIPC-related relief to all nonbank trustees and custodians that are brokerdealers and members of SIPC rather than limiting the relief to passive nonbank trustees and custodians. The final regulations provide that the

Section 101.—Certain Death Benefits

The Service will not rule on certain issues raised in connection with the transfer of a life insurance policy to an unincorporated organization. See Rev. Proc. 96–12, page 30.

Section 103.—Interest on State and Local Bonds

A revenue procedure sets forth procedures for requesting a ruling under §§ 103, 141–150, 1395, and 7871(c) of the Code. See Rev. Proc. 96–16, page 45.

Section 170.—Charitable, etc., Contributions and Gifts

26 CFR 1.170A–13: Recordkeeping and return requirements for deductions for charitable contributions.

The contributor of art appraised at $50,000 or more may request that the Service issue a Statement of Value for the art. See Rev. Proc. 96–15, page 41.

Section 401.—Qualified Pension, Profit-sharing, and Stock Bonus Plans

26 CFR 1.401(f)–1: Certain custodial accounts on annuity contracts.

T.D. 8635

DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1

Nonbank Trustee Net Worth Requirements

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

SUMMARY: This document contains regulations that provide guidance to nonbank trustees with respect to the adequacy of net worth requirements that must be satisfied in order to be or remain an approved nonbank trustee. These regulations affect nonbank trustees and custodians of individual retirement accounts, and nonbank custodians of qualified plans and taxsheltered annuities.

EFFECTIVE DATE: These regulations are effective December 20, 1995.

FOR FURTHER INFORMATION CONTACT: Marjorie Hoffman, (202) 622-6030 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

On December 6, 1994, temporary regulations (TD 8570 [1994–2 C.B. 49]) under section 401 were published in the Federal Register (59 FR 62570). A notice of proposed rulemaking (EE– 38–94 [1994–2 C.B. 49]), crossreferencing the temporary regulations, was published in the Federal Register (59 FR 62644) on the same day. The temporary regulations provide guidance on the adequacy of net worth requirements for nonbank trustees and custodians of individual retirement plans, and for nonbank custodians of custodial accounts of qualified plans and taxsheltered annuities.

After consideration of all of the comments, the temporary regulations are replaced and the proposed regulations are adopted as revised by this Treasury decision. Because section 401(d)(1), under which § 1.401–12 was originally issued, was repealed by section 237(a) of the Tax Equity and Fiscal Responsibility Act of 1982, Public Law 97–248 (1982), these final regulations also move all the rules for nonbank trustees and custodians that were previously in § 1.401–12(n) to § 1.408–2.

Explanation of Provisions

The fiduciary conduct rules for nonbank trustees and custodians under longstanding Treasury regulations require nonbank trustees and custodians to maintain a minimum amount of net worth in order to qualify as an approved nonbank trustee or custodian. Under this requirement, the nonbank trustee or custodian’s net worth must exceed the greater of a specified dollar amount or a percentage of the value of all assets held in fiduciary accounts of retirement plans. A primary objective of this adequacy-of-net-worth requirement has been to ensure that nonbank trustees and custodians maintain a level

Removing the language ‘‘For the plan years to which this paragraph applies, the’’ and adding ‘‘The’’ in its place, and removing the language ‘‘(c)(1)(i)’’ and adding ‘‘(b)’’ in its place, in the first sentence of newly designated paragraph (e)(1).
Removing the language ‘‘401’’ and adding ‘‘408’’ in its place, and removing the language ‘‘(n)(3) to (n)(7)’’ and adding ‘‘(e)(2) to (e)(6)’’ in its place, in the second sentence of newly designated paragraph (e)(1).
Removing the language ‘‘Commissioner of Internal Revenue, Attention: E:EP, Internal Revenue Service, Washington, D.C. 20224’’ and adding ‘‘the address prescribed by the Commissioner in revenue rulings, notices, and other guidance published in the Internal Revenue Bulletin (see § 601.601(d)(2)(ii)( b ) of this chapter)’’ in its place in the third sentence of newly designated paragraph (e)(1), in the last sentence of newly designated (e)(6)(9)(iv), and in the first sentence of newly designated (e)(6)(v)(B).
Removing the language ‘‘(n)(8)’’ and adding ‘‘(e)(7)’’ in its place in the last sentence of newly designated paragraph (e)(1).
Removing the language ‘‘(n)(6)’’ and adding ‘‘(e)(5)’’ in its place in newly designated paragraph (e)(2)(iv).
Redesignating newly designated paragraph (e)(5)(ii)(A) as paragraph (e)(5)(ii)(E).
Removing the language ‘‘(n)(7)(i)(A)’’ and adding ‘‘(e)(6)(i)(A)’’ in its place in newly designated paragraph (e)(5)(ii)(B)( 2 ) and in newly designated paragraph (e)(5)(ii)(C)( 2 ).
Removing the language ‘‘(n)(6)(iii)(A)’’ and adding ‘‘(e)(5)(iii)(A)’’ in its place in newly designated paragraph (e)(5)(iii)(B).
Removing the language ‘‘(n)(6)(vi)’’ and adding ‘‘(e)(5)(vi)’’ in its place in newly designated paragraph (e)(5)(v)(A).
Removing the language ‘‘(n)(6)(viii)(C)’’ and adding ‘‘(e)(5)(viii)(C)’’ in its place in newly designated paragraph (e)(5)(vi).
Removing the language ‘‘(n)(3)(v)’’ and adding ‘‘(e)(2)(v)’’ in its place, and removing the language ‘‘(n)(8)’’ and adding ‘‘(e)(7)’’ in its place, in newly designated paragraph (e)(5)(viii).
Removing the language ‘‘(n)(6)(i)(A)(3)’’ and adding ‘‘(e)(5)(i)(A)

amount of the minimum net worth requirement for nonbank trustees and custodians that are SIPC members is reduced by either two percent of assets insured by SIPC (in the case of the minimum net worth requirement that applies to a trustee or custodian accepting additional accounts) or one percent of assets insured by SIPC (in the case of the minimum net worth requirement that must be satisfied to avoid a mandatory relinquishment of accounts). An example in the regulations illustrates this rule.

The final regulations also retain the rule in the proposed and temporary regulations that increased the initial net worth requirement for all nonbank trustees and custodians. The purpose of the rule is to better assure that the enterprises are sound and well-funded during their start-up period. This initial net worth requirement requires all new entities applying for nonbank trustee or custodian status to have a net worth of not less than $250,000 for the most recent taxable year preceding the applicant’s initial application.

This new initial net worth requirement applies only to applications received after January 5, 1995. Previously approved nonbank trustees and custodians need only satisfy the ongoing net worth requirement.

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, 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 author of these regulations is Marjorie Hoffman, Office of the Associate Chief Counsel, (Employee Benefits and Exempt Organizations) IRS. However, other person

nel from the IRS and Treasury Department participated in their development.

- - - - -

Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 1 is amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation for part 1 is amended by adding an entry in numerical order to read as follows:

Authority: 26 U.S.C. 7805. * * * § 1.401–12 also issued under 26 U.S.C. 401(d)(1). * * *

§§ 1.401–12 and 1.408–2 [Amended]

Par. 2. Paragraph (n) of § 1.401–12 is redesignated as paragraph (e) of § 1.408–2 and the authority citation immediately following § 1.401–12 is removed.

§ 1.401–12T [Removed]

Par. 3. Section 1.401–12T is removed.

§ 1.401(f)–1 [Amended]

Par. 4. Section 1.401(f)–1 is amended by:

Removing the language ‘‘section 401(d)(1) and the regulations thereunder’’ and adding ‘‘§ 1.408–2(e)’’ in its place in the last sentence of paragraph (b)(1)(ii).
Removing the language ‘‘401(d)(1) and adding ‘‘408(n)’’ in its place in paragraph (d)(1).

Par. 5. Section 1.408–2 is amended by:

Removing the language ‘‘401(d)(1)’’ and adding ‘‘408(n)’’ in its place in paragraph (b)(2)(i).
Removing the language ‘‘(b)(2)(ii)’’ and adding ‘‘(e)’’ in its place in paragraph (b)(2)(i).
Removing paragraph (b)(2)(ii).
Redesignating (b)(2)(iii) as (b)(2)(ii)
Removing newly redesignated paragraphs (e)(1) and (e)(9).
Further redesignating paragraphs (e)(2) through (e)(8) as paragraphs (e)(1) through (e)(7), respectively.

(3)’’ in its place, and removing the language ‘‘(n)(5)(ii)(E)’’ and adding ‘‘(e)(4)(ii)(E)’’ in its place, in the third sentence of newly designated paragraph (e)(6)(i)(A).

Removing the language ‘‘(n)(7)(iii)(A)( 3 )’’ and adding ‘‘(e)(6)(iii)(A)( 3 )’’ in its place in newly designated paragraph (e)(6)(iii)(C).
Revising newly redesignated paragraphs (e)(5)(ii)(A) and adding (e)(5)(ii)(D).
The revisions and addition read as follows:

§ 1.408–2 Individual retirement accounts

- - - - -

(e) * * *

(5) * * * (ii) Adequacy of net worth —(A) Ini- tial net worth requirement . In the case of applications received after January 5, 1995, no initial application will be accepted by the Commissioner unless the applicant has a net worth of not less than $250,000 (determined as of the end of the most recent taxable year). Thereafter, the applicant must satisfy the adequacy of net worth requirements of paragraph (e)(6)(ii)(B) and (C) of this section.

- - - - -

(D) Assets held by members of SIPC - 1 ) For purposes of satisfying the adequacy-of-net worth requirement of this paragraph, a special rule is provided for nonbank trustees that are members of the Securities Investor Protection Corporation (SIPC) created under the Securities Investor Protection Act of 1970 (SIPA)(15 U.S.C. § 78 aaa et seq, as amended). The amount that the net worth of a nonbank trustee that is a member of SIPC must exceed is reduced by two percent for purposes of paragraph (e)(5)(ii)(B)(2), and one percent for purposes of paragraph (e)(5)(ii)(C)(2), of the value of assets (determined on an account-by-account basis) held for the benefit of customers (as defined in 15 U.S.C. § 78fff–2(e)(4)) in fiduciary accounts by the nonbank trustee to the extent of the portion of each account that does not exceed the dollar limit on advances described in 15 U.S.C. § 78fff–3(a), as amended, that would apply to the assets in that

account in the event of a liquidation proceeding under the SIPA.

( 2 ) The provisions of this special rule for assets held in fiduciary accounts by members of SIPC are illustrated in the following example.

Example —(a) Trustee X is a broker-dealer and is a member of the Securities Investment Protection Corporation. Trustee X also has been approved as a nonbank trustee for individual retirement accounts (IRAs) by the Commissioner but not as a passive nonbank trustee. Trustee X is the trustee for four IRAs. The total assets of each IRA (for which Trustee X is the trustee) as of the most recent valuation date before the last day of Trustee X’s taxable year ending in 1995 are as follows: the total assets for IRA–1 is $3,000,000 (all of which is invested in securities); the value of the total assets for IRA–2 is $500,000 ($200,000 of which is cash and $300,000 of which is invested in securities), the value of the total assets for IRA–3 is $400,000 (all of which is invested in securities); and the value of the total assets of IRA–4 is $200,000 (all of which is cash). The value of all assets held in fiduciary accounts, as defined in § 1.408– 2(e)(6)(viii)(A), is $4,100,000.

(b) The dollar limit on advances described in 15 U.S.C. § 78fff–3(a) that would apply to the assets in each account in the event of a liquidation proceeding under the Securities Investor Protection Act of 1970 in effect as of the last day of Trustee X’s taxable year ending in 1995 is $500,000 per account (no more that $100,000 of which is permitted to be cash). Thus, the dollar limit that would apply to IRA–1 is $500,000; the dollar limit for IRA–2 is $400,000 ($100,000 of the cash and the $300,000 of the value of the securities); the dollar limit for IRA–3 is $400,000 (the full value of the account because the value of the account is less than $500,000 and no portion of the account is cash); and the dollar limit for IRA–4 is $100,000 (the entire account is cash and the dollar limit per account for cash is $100,000). The aggregate dollar limits of the four IRAs is $1,400,000.

(c) For 1996, the amount determined under § 1.408–2(e)(6)(ii)(B) is determined as follows for Trustee X: (1) four percent of $4,100,000 equals $164,000; (2) two percent of $1,400,000 equals $28,000; and (3) $164,000 minus $28,000 equals $136,000. Thus, because $136,000 exceeds $100,000, the minimum net worth necessary for Trustee X to accept new accounts for 1996 is $136,000.

(d) For 1996, the amount determined under § 1.408–2(e)(6)(ii)(C) for Trustee X is determined as follows: (1) two percent of $4,100,000 equals $82,000; (2) one percent of $1,400,000 equals $14,000; and (3) $82,000 minus $14,000 equals $68,000. Thus, because $68,000 exceeds $50,000, the minimum net worth necessary for Trustee X to avoid a mandatory relinquishment of accounts for 1996 is $68,000.

- - - - -

Margaret Milner Richardson,

Commissioner of

Internal Revenue.

Approved December 12, 1995.

Leslie Samuels, Assistant Secretary of

the Treasury.

(Filed by the Office of the Federal Register on

December 19, 1995, 8:45 a.m., and published in the issue of the Federal Register for December 20, 1995, 60 F.R. 65547)

Section 411.—Minimum Vesting Standards

26 CFR 1.411(d)–6T: Section 204(h) notice.

T.D. 8631

DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1 and 602

Notice of Significant Reduction in the Rate of Future Benefit Accrual

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

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 *** [EE–34–95, page 49, this Bulletin.]

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 proce

dure 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 * - - [EE– 34–95, page 00, this Bulletin]. 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 SingleEmployer 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, 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 partici

pant 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.

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)

1This is not intended to affect the rights of employees under other provisions of ERISA.

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 December 30, 1995.

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.

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.

- - - - -

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. 1.411(d)–6T is added to read as follows:

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: Section 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 Com- missioner . The Commissioner of Internal Revenue may provide through publication in the Internal Revenue Bulletin of revenue rulings, notices, or other documents (see 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 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 ac

crual; 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 1.401(a)(4)– 8(b)(3)(i)). (b) Plan provisions not taken into account . Plan provisions that do not 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.

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

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.

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 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 ter- mination 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 December 30, 1995.

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 602.101, paragraph (c) is amended by adding to the table in numerical order the entry ‘‘1.411(d)– 6T . .. 1545–1477’’.

Approved December 5, 1995.

Leslie Samuels, Assistant Secretary

of the Treasury.

(Filed by the Office of the Federal Register on

December 12, 1995, 1:23 p.m., and published in the issue of the Federal Register for December 15, 1995, 60 F.R. 64401)

Section 412.—Minimum Funding Standards

Disability mortality tables. This ruling provides mortality tables for use under section 412(1) for plan years after 1995 to calculate current liability for individuals entitled to benefits on account of disability.

Rev. Rul. 96–7

ISSUE

What alternative mortality tables may be used to calculate a plan’s current liability under § 412(l) of the Internal Revenue Code for individuals who are entitled to benefits under the plan on account of disability?

LAW AND ANALYSIS

Section 412(l) provides additional funding requirements for certain underfunded defined benefit pension plans that have more than 100 participants and that are not multiemployer plans. In general, the additional funding requirements are determined based on a plan’s unfunded current liability.

Section 751(a) of the Retirement Protection Act of 1994 added § 412(l)(7)(C)(ii) to the Code, effective for plan years beginning after December 31, 1994. Section 412(l)(7)(C)(ii)

Margaret Milner Richardson,

Commissioner of

Internal Revenue.

provides that, for purposes of determining current liability, the mortality table used shall be the table prescribed by the Secretary, and sets forth the basis for establishing a table. For plan years beginning before the effective date of the first tables prescribed under § 412(l)(7)(C)(ii)(II), the table must be based on the prevailing commissioners’ standard table (described in § 807(d)(5)(A)) used to determine reserves for group annuity contracts issued on January 1, 1993. Rev. Rul. 95–28, 1995–1 C.B. 74, sets forth this mortality table.

Section 412(l)(7)(C)(iii)(I) provides that, for plan years beginning after December 31, 1995, the Secretary shall establish mortality tables that may be used, in lieu of the tables under § 412(l)(7)(C)(ii), to determine current liability under § 412(l) for individuals who are entitled to benefits under the plan on account of disability. The Secretary must establish separate tables for individuals whose disabilities occurred in plan years beginning before January 1, 1995, and for individuals whose disabilities occur in plan years beginning after December 31, 1994. Under § 412(l)(7)(C)(iii)(II), the mortality table for individuals whose disabilities occur in plan years beginning after December 31, 1994, applies only with respect to individuals who are disabled within the meaning of title II of the Social Security Act and the regulations thereunder.

The alternative mortality tables provided for under § 412(l)(7)(C)(iii) are permitted to be used in the specified circumstances, but are not required to be used. For any individual for whom these alternative mortality tables are not used, the mortality table prescribed under § 412(l)(7)(C)(ii) must be used.

The alternative mortality tables provided under § 412(l)(7)(C)(iii) may be used only for individuals who are entitled to benefits under the plan on account of disability. For this purpose, an individual is entitled to benefits under a plan on account of disability if, because of the occurrence of a disability, the individual is entitled to receive a benefit to which the individual would not be entitled in the absence of the disability. For example, an individual is entitled to benefits under a plan on account of disability if, upon the occurrence of a disability at a time before the individual would have been entitled to receive an unreduced normal retirement benefit upon retire

ment, the individual is entitled to receive the same annuity that would have been payable to the individual upon retirement at normal retirement age. As a further example, an individual is entitled to benefits under a plan on account of disability if the individual, who would not otherwise be earning service credits, is credited with years of service for the period of disability. On the other hand, an individual is not entitled to benefits on account of disability if the individual separates from the service of the employer because of a disability, but merely receives the same benefit that would have been payable if the individual had separated from service without the occurrence of the disability.

For purposes of § 412(l)(7)(C)(iii), any individual who has become entitled to benefits under a plan on account of disability continues to be considered entitled to benefits under the plan on account of disability until the individual recovers from disability and becomes entitled to different benefits under the plan than the individual would have been entitled to if the individual had not recovered.

Under § 412(l), nothing prohibits the use of an additional actuarial assumption that meets the requirements of § 412(c) regarding the probability of recovery from disability.

HOLDING

The mortality tables provided below, as applicable, may be used for plan years beginning after December 31, 1995, in lieu of the mortality table required to be used under § 412(l)(7)(C)(ii), for purposes of determining current liability. The first mortality table provided below may be used for plan years beginning after December 31, 1995, in lieu of the mortality table required to be used under § 412(l)(7)(C)(ii), for purposes of determining current liability for individuals entitled to benefits under the plan on account of disability, whose disabilities occurred in plan years beginning before January 1, 1995. The second mortality table provided below may be used for plan years beginning after December 31, 1995, in lieu of the mortality table required to be used under § 412(l)(7)(C)(ii), for purposes of determining current liability for individuals entitled to benefits under the plan on account of disability, whose disabilities occur in

plan years beginning after December 31, 1994. This second mortality table may be used only for individuals who are disabled within the meaning of title II of the Social Security Act and the regulations thereunder. The mortality table required to be used under § 412(l)(7)(C)(ii) must be used for individuals whose disabilities occur in plan years beginning after December 31, 1994, but who are not disabled within the meaning of title II of the Social Security Act and the regulations thereunder.

MORTALITY TABLE FOR DISABILITIES OCCURRING IN PLAN YEARS BEGINNING BEFORE JANUARY 1, 1995

The following mortality table is the mortality table that is permitted to be used for individuals entitled to benefits under the plan on account of disability, whose disabilities occurred in plan years beginning before January 1, 1995. The table sets forth the number living based upon a starting population of one million lives at age 15 (lx), and the annual rate of mortality (qx), to be used for each age and each gender.

Age lx male qx male

15 1,000,000.00 0.006245 16 993,755.00 0.006493 17 987,302.55 0.006749 18 980,639.24 0.007018 19 973,757.12 0.007297 20 966,651.61 0.007586 21 959,318.59 0.007887 22 951,752.45 0.008201 23 943,947.13 0.008526 24 935,899.03 0.008864 25 927,603.22 0.009216 26 919,054.43 0.009581 27 910,248.97 0.009964 28 901,179.25 0.010358 29 891,844.84 0.010768 30 882,241.45 0.011190 31 872,369.17 0.011624 32 862,228.75 0.012071 33 851,820.79 0.012531 34 841,146.62 0.013022 35 830,193.21 0.013421 36 819,051.19 0.013892 37 807,672.93 0.014380 38 796,058.59 0.014889 39 784,206.07 0.015420 40 772,113.62 0.015976 41 759,778.33 0.016562 42 747,194.88 0.017179 43 734,358.82 0.017831

Age lx male qx male

44 721,264.47 0.018521 45 707,905.93 0.019251 46 694,278.03 0.020025 47 680,375.11 0.020846 48 666,192.01 0.021716 49 651,724.99 0.022639 50 636,970.59 0.023624 51 621,922.79 0.024617 52 606,612.92 0.025865 53 590,922.88 0.027076 54 574,923.05 0.028263 55 558,674.00 0.029451 56 542,220.49 0.030667 57 525,592.21 0.031937 58 508,806.38 0.033281 59 491,872.79 0.034700 60 474,804.81 0.036185 61 457,623.99 0.037729 62 440,358.30 0.039325 63 423,041.21 0.040976 64 405,706.67 0.042720 65 388,374.88 0.044607 66 371,050.64 0.046684 67 353,728.52 0.049000 68 336,395.82 0.051594 69 319,039.81 0.054468 70 301,662.35 0.057612 71 284,282.98 0.061019 72 266,936.32 0.064679 73 249,671.14 0.068604 74 232,542.70 0.072881 75 215,594.76 0.076965 76 199,001.51 0.081027 77 182,877.01 0.085222 78 167,291.87 0.089592 79 152,303.86 0.094182 80 137,959.57 0.099034 81 124,296.89 0.104194 82 111,345.90 0.109705 83 99,130.69 0.115609 84 87,670.29 0.121952 85 76,978.73 0.128777 86 67,065.64 0.136128 87 57,936.13 0.144048 88 49,590.54 0.152581 89 42,023.97 0.161771 90 35,225.71 0.171662 91 29,178.79 0.182297 92 23,859.59 0.193720 93 19,237.51 0.205975 94 15,275.06 0.219106 95 11,928.20 0.234086 96 9,135.98 0.248436 97 6,866.27 0.263954 98 5,053.89 0.280803 99 3,634.74 0.299154 100 2,547.40 0.319185 101 1,734.31 0.341086 102 1,142.76 0.365052 103 725.59 0.393102 104 440.36 0.427255 105 252.21 0.469531

Age lx male qx male

106 133.79 0.521945 107 63.96 0.586518 108 26.45 0.665268 109 8.85 0.760215 110 2.12 1.000000

Age lx female qx female

15 1,000,000.00 0.004667 16 995,333.00 0.004873 17 990,482.74 0.005086 18 985,445.15 0.005312 19 980,210.46 0.005546 20 974,774.22 0.005790 21 969,130.27 0.006046 22 963,270.91 0.006313 23 957,189.78 0.006591 24 950,880.94 0.006881 25 944,337.93 0.007185 26 937,552.86 0.007502 27 930,519.34 0.007834 28 923,229.65 0.008179 29 915,678.56 0.008537 30 907,861.41 0.008905 31 899,776.90 0.009282 32 891,425.18 0.009666 33 882,808.66 0.010061 34 873,926.72 0.010489 35 864,760.10 0.010885 36 855,347.19 0.011246 37 845,727.96 0.011599 38 835,918.36 0.011947 39 825,931.64 0.012292 40 815,779.29 0.012636 41 805,471.10 0.012981 42 795,015.28 0.013330 43 784,417.73 0.013684 44 773,683.76 0.014045 45 762,817.37 0.014417 46 751,819.83 0.014800 47 740,692.90 0.015197 48 729,436.59 0.015611 49 718,049.35 0.016043 50 706,529.69 0.016495 51 694,875.48 0.016970 52 683,083.44 0.017470 53 671,149.97 0.017997 54 659,071.29 0.018553 55 646,843.54 0.019140 56 634,462.95 0.019761 57 621,925.33 0.020417 58 609,227.48 0.021111 59 596,366.08 0.021845 60 583,338.46 0.022621 61 570,142.76 0.023441 62 556,778.05 0.024307 63 543,244.44 0.025222 64 529,542.73 0.026187 65 515,675.60 0.027205 66 501,646.64 0.028278 67 487,461.08 0.029408 68 473,125.82 0.030598

Age lx female qx female 69 458,649.12 0.031848 70 444,042.06 0.033123 71 429,334.06 0.034916 72 414,343.43 0.036986 73 399,018.52 0.039352 74 383,316.35 0.042033 75 367,204.41 0.044540 76 350,849.13 0.047104 77 334,322.73 0.049840 78 317,660.08 0.052794 79 300,889.54 0.056017 80 284,034.61 0.059556 81 267,118.64 0.063460 82 250,167.29 0.067777 83 233,211.70 0.072556 84 216,290.80 0.077845 85 199,453.64 0.083693 86 182,760.77 0.090148 87 166,285.25 0.097260 88 150,112.35 0.105075 89 134,339.29 0.113643 90 119,072.57 0.123012 91 104,425.22 0.133216 92 90,514.11 0.143634 93 77,513.20 0.155581 94 65,453.62 0.169181 95 54,380.11 0.184537 96 44,344.97 0.201757 97 35,398.06 0.222043 98 27,538.17 0.243899 99 20,821.64 0.268185 100 15,237.59 0.295187 101 10,739.65 0.325225 102 7,246.85 0.358897 103 4,645.98 0.395842 104 2,806.90 0.438360 105 1,576.47 0.487816 106 807.44 0.545886 107 366.67 0.614309 108 141.42 0.694884 109 43.15 0.789474 110 9.08 1.000000

MORTALITY TABLE FOR DISABILITIES OCCURRING IN PLAN YEARS BEGINNING AFTER DECEMBER 31, 1994

The following mortality table is the mortality table that is permitted to be used for individuals entitled to benefits under the plan on account of disability, whose disabilities occur in plan years beginning after December 31, 1994. This mortality table may be used only for individuals who are disabled within the meaning of title II of the Social Security Act and the regulations thereunder. The table sets forth the number living based upon a starting population of one million lives at age 15 (lx), and the annual rate of mortality (qx), to be used for each age and each gender.

Age lx male qx male

15 1,000,000.00 0.022010 16 977,990.00 0.022502 17 955,983.27 0.023001 18 933,994.70 0.023519 19 912,028.08 0.024045 20 890,098.36 0.024583 21 868,217.07 0.025133 22 846,396.17 0.025697 23 824,646.33 0.026269 24 802,983.70 0.026857 25 781,417.96 0.027457 26 759,962.57 0.028071 27 738,629.66 0.028704 28 717,428.04 0.029345 29 696,375.11 0.029999 30 675,484.55 0.030661 31 654,773.52 0.031331 32 634,258.81 0.032006 33 613,958.72 0.032689 34 593,889.03 0.033405 35 574,050.16 0.034184 36 554,426.83 0.034981 37 535,032.43 0.035796 38 515,880.41 0.036634 39 496,981.64 0.037493 40 478,348.31 0.038373 41 459,992.65 0.039272 42 441,927.82 0.040189 43 424,167.18 0.041122 44 406,724.58 0.042071 45 389,613.27 0.043033 46 372,847.04 0.044007 47 356,439.16 0.044993 48 340,401.90 0.045989 49 324,747.15 0.046993 50 309,486.31 0.048004 51 294,629.73 0.049021 52 280,186.69 0.050042 53 266,165.58 0.051067 54 252,573.31 0.052093 55 239,416.00 0.053120 56 226,698.23 0.054144 57 214,423.88 0.055089 58 202,611.48 0.056068 59 191,251.46 0.057080 60 180,334.83 0.058118 61 169,854.13 0.059172 62 159,803.52 0.060232 63 150,178.23 0.061303 64 140,971.86 0.062429 65 132,171.12 0.063669 66 123,755.92 0.065082 67 115,701.64 0.066724 68 107,981.56 0.068642 69 100,569.49 0.070834 70 93,445.75 0.073284 71 86,597.67 0.075979 72 80,018.07 0.078903 73 73,704.40 0.082070 74 67,655.48 0.085606 75 61,863.77 0.088918 76 56,362.97 0.092208

Age lx male qx male

77 51,165.85 0.095625 78 46,273.11 0.099216 79 41,682.08 0.103030 80 37,387.58 0.107113 81 33,382.88 0.111515 82 29,660.19 0.116283 83 26,211.21 0.121464 84 23,027.49 0.127108 85 20,100.52 0.133262 86 17,421.88 0.139974 87 14,983.27 0.147292 88 12,776.35 0.155265 89 10,792.63 0.163939 90 9,023.30 0.173363 91 7,458.99 0.183585 92 6,089.63 0.194653 93 4,904.27 0.206615 94 3,890.97 0.219519 95 3,036.83 0.234086 96 2,325.95 0.248436 97 1,748.10 0.263954 98 1,286.68 0.280803 99 925.38 0.299154 100 648.55 0.319185 101 441.54 0.341086 102 290.94 0.365052 103 184.73 0.393102 104 112.11 0.427255 105 64.21 0.469531 106 34.06 0.521945 107 16.28 0.586518 108 6.73 0.665268 109 2.25 0.760215 110 0.54 1.000000

Age lx female qx female

15 1,000,000.00 0.007777 16 992,223.00 0.008120 17 984,166.15 0.008476 18 975,824.36 0.008852 19 967,186.36 0.009243 20 958,246.66 0.009650 21 948,999.58 0.010076 22 939,437.46 0.010521 23 929,553.63 0.010984 24 919,343.42 0.011468 25 908,800.39 0.011974 26 897,918.41 0.012502 27 886,692.64 0.013057 28 875,115.09 0.013632 29 863,185.52 0.014229 30 850,903.25 0.014843 31 838,273.30 0.015473 32 825,302.69 0.016103 33 812,012.85 0.016604 34 798,530.18 0.017121

Age lx female qx female

35 784,858.55 0.017654 36 771,002.66 0.018204 37 756,967.32 0.018770 38 742,759.05 0.019355 39 728,382.95 0.019957 40 713,846.61 0.020579 41 699,156.36 0.021219 42 684,320.96 0.021880 43 669,348.02 0.022561 44 654,246.86 0.023263 45 639,027.11 0.023988 46 623,698.13 0.024734 47 608,271.58 0.025504 48 592,758.22 0.026298 49 577,169.87 0.027117 50 561,518.75 0.027961 51 545,818.12 0.028832 52 530,081.10 0.029730 53 514,321.79 0.030655 54 498,555.25 0.031609 55 482,796.42 0.032594 56 467,060.15 0.033608 57 451,363.19 0.034655 58 435,721.20 0.035733 59 420,151.58 0.036846 60 404,670.67 0.037993 61 389,296.02 0.039176 62 374,044.96 0.040395 63 358,935.41 0.041653 64 343,984.68 0.042950 65 329,210.53 0.044287 66 314,630.79 0.045666 67 300,262.86 0.046828 68 286,202.15 0.048070 69 272,444.41 0.049584 70 258,935.53 0.051331 71 245,644.11 0.053268 72 232,559.14 0.055356 73 219,685.59 0.057573 74 207,037.63 0.059979 75 194,619.72 0.062574 76 182,441.59 0.065480 77 170,495.31 0.068690 78 158,783.99 0.072237 79 147,313.91 0.076156 80 136,095.07 0.080480 81 125,142.14 0.085243 82 114,474.65 0.090480 83 104,116.98 0.096224 84 94,098.43 0.102508 85 84,452.59 0.109368 86 75,216.18 0.116837 87 66,428.15 0.124948 88 58,128.08 0.133736 89 50,354.26 0.143234 90 43,141.82 0.153477 91 36,520.54 0.164498

Age lx female qx female

92 30,512.99 0.176332 93 25,132.57 0.189011 94 20,382.24 0.202571 95 16,253.39 0.217045 96 12,725.67 0.232467 97 9,767.37 0.248870 98 7,336.57 0.266289 99 5,382.92 0.284758 100 3,850.09 0.303433 101 2,681.85 0.327385 102 1,803.85 0.359020 103 1,156.23 0.395842 104 698.55 0.438360 105 392.33 0.487816 106 200.95 0.545886 107 91.25 0.614309 108 35.20 0.694884 109 10.74 0.789474 110 2.26 1.000000

EFFECTIVE DATE

This revenue ruling is effective for plan years beginning after December 31, 1995.

DRAFTING INFORMATION

The principal author of this revenue ruling is Edward Sypher of the Employee Plans Division. For further information regarding this revenue ruling, please contact the Employee Plans Division’s taxpayer assistance telephone service at (202) 622-6076 between 2:30 and 4:00 Eastern time (not a toll-free number) Monday through Thursday. Mr. Sypher’s number is (202) 622-6245 (also not a toll-free number).