SECTION 3. PUBLIC COMMENTS

AND MODIFICATIONS TO NOTICE 2004–61

Notice 2004–61 requested comments on the need for additional guidance on the adoption of the 2001 CSO tables. This notice modifies Notice 2004–61 in response to the comments that were received. First, the safe harbor for contracts issued based on the 1980 CSO tables (1980 CSO contracts) is modified to remove the requirement in Notice 2004–61 that mortality charges used to determine whether a contract qualifies as a life insurance contract under § 7702 not exceed the mortality charge specified in the contract at issuance. Second, the new rules for gender- or smoker-based tables are modified to apply only to contracts issued based upon the 2001 CSO tables (2001 CSO contracts). These two changes help to ensure that the notice does not subject 1980 CSO contracts to more stringent standards, retroactively, than applied under Notice 88–128. Third, the rule for determining the issue date of a contract that undergoes an increase or decrease in death benefit is simplified by eliminating the concept of “underwriting.” This change broadens the grandfather rule of Notice 2004–61 to encompass many routine transactions, but does not wholly defer to an issuer’s administrative practices and procedures. Fourth, additional examples are provided of changes, modifications, or exercises of contractual provisions that will not require a change from previous tables to the 2001 CSO tables. Except as described above, this notice does not modify the definition of “issue date” that was provided in Notice 2004–61.