SECTION 3. EXERCISE OF

AUTHORITY UNDER § 7805(b)(8)

.01 In general . Pursuant to the Commissioner’s authority under § 7805(b)(8), a plan will not be treated as having failed to satisfy the requirements of § 401(a) merely because an amendment adopted before June 7, 2004, violated § 411(d)(6) by adding or expanding a provision under which a suspension of benefits occurs on account of section 203(a)(3)(B) service. This treatment applies only if a reforming amendment, as described in section 3.02, is adopted and the plan complies operationally with that amendment, as described in sections 3.02, 3.03, and 3.04. For purposes of this revenue procedure, an amendment adopted before June 7, 2004, that violated § 411(d)(6) by adding or expanding a provision under which a suspension of benefits occurs on account of section 203(a)(3)(B) service is referred to as the original amendment, and the amendment required under section 3.02 is referred to as the reforming amendment. This section 3.01 applies to any such original amendment regardless of whether the amendment provided for a suspension of payment of the accrued benefit or for a suspension of the payment of early retirement benefits or retirement-type subsidies such as those at issue in Central Laborers’, and regardless of whether the plan as amended by the original amendment provided that subsequent benefit payments under the plan were actuarially adjusted to take into account the fact that benefits were not paid during the suspen

sion period. For purposes of this revenue procedure, a provision under which a suspension of benefits occurs on account of section 203(a)(3)(B) service includes a provision that results in a plan not providing actuarial increases as a result of such service after normal retirement age. If a plan has more than one original amendment that violated § 411(d)(6) by adding or expanding a provision under which a suspension of benefits occurs on account of section 203(a)(3)(B) service, this revenue procedure applies separately to each amendment.

.02 Reforming amendment . (1) General requirements . The reforming amendment must provide that, beginning on June 7, 2004, the provisions of the original amendment that suspend benefits do not apply with respect to benefits that had accrued as of the applicable amendment date for the original amendment and must provide certain participants with an option to commence payment of their benefits, as described in section 3.04. For purposes of this revenue procedure, the applicable amendment date for a plan amendment is the later of the effective date of the amendment or the date the amendment is adopted. However, the reforming amendment is permitted to provide that the suspension of benefit provisions of the original amendment will continue to apply with respect to benefits that had accrued after the applicable amendment date for the original amendment. Further, a plan may continue to apply the suspension of benefit provision as in effect immediately prior to the original amendment with respect to all accrued benefits (accruing both before and after the original amendment).

(2) Broader reforming amendments permitted . The reforming amendment is permitted to provide greater benefits to participants than the minimum required under section 3.02(1). For example, in addition to satisfying the minimum requirements of this section 3, a reforming amendment might provide that the suspension of benefit provisions of the original amendment cease to apply beginning on a date earlier than June 7, 2004, and might also provide a corresponding opportunity for participants to apply for retroactive benefits commencing on that earlier date. Similarly, the reforming amendment might apply to the entire accrued benefit of those participants with an accrued benefit on the

May 2, 2005 992 2005–18 I.R.B.

to commence receipt of benefits. See § 1.417(e)–1 for rules relating to retroactive annuity starting dates.

(2) Eligibility for option . A participant who is eligible for the option described in section 3.04(1) is one who —

(a) at any time after the applicable amendment date of the original amendment, was eligible to commence the receipt of benefits under the plan, determined without regard to the suspension of benefit provisions of the original amendment,

(b) at the same time, engaged in section 203(a)(3)(B) service for which benefits were not permitted to commence, as determined taking into account the original amendment, and

(c) is not an affected participant as defined in section 3.03 ( e.g., is a participant who did not apply for benefits).

(3) Election period . The election period for the option set forth in section 3.04(1) begins within a reasonable time period after participants described in section 3.04(2) have received notification of the option in accordance with section 3.04(4) and ends no sooner than six months after notification. Reasonable efforts must be taken to notify all such participants. For those participants not located after a mailing to the last known address, reasonable efforts include the use of the Internal Revenue Service Letter Forwarding Program (see Rev. Proc. 94–22, 1994–1 C.B. 608) or the Social Security Administration Employer Reporting Service.

(4) Notification requirement . The plan must provide notice of the option set forth in section 3.04(1) to each participant described in section 3.04(2). In addition to satisfying any generally applicable notice requirements, the notice of the option to commence payment of benefits must be designed to be readily understandable by the average plan participant. The notice must explain the option to commence retroactive payment of benefits, as described in section 3.04(1), and the period for making the election, as described in section 3.04(3). The notice must be sent on or before January 1, 2006.

.05 Terminated plans . A plan that was terminated with a termination date before June 7, 2004, is not required to adopt a

1 See section 21 of Rev. Proc. 2005–6, 2005–1 I.R.B. 200.

reforming plan amendment or take the actions required in sections 3.02 through 3.05 in order to receive the treatment provided in section 3.01.