SECTION 2. BACKGROUND

.01 Qualification as a life insurance contract under § 7702 . (1) Section 7702 defines the term “life insurance contract” for all purposes of the Code. Section 7702(a) provides that a “life insurance contract” is any contract that is a life insurance contract under the applicable law, but only if such contract either (1) meets the cash value accumulation test of § 7702(b), or (2) meets the guideline premium requirements of § 7702(c) and falls within the cash value corridor of § 7702(d). (For flexible premium life insurance contracts issued before January 1, 1985, § 101(f)(1) provides that any amount paid by reason of death of the insured under a flexible premium life insurance contract issued before January 1, 1985, is excluded from gross income only if, under the contract, the sum of the premiums does not exceed the guideline premium limitation as of such time.)

§ 1.411(d)–3(g)(2)(vi), that are permitted to be provided in a qualified defined benefit plan.

The guidance also might clarify that an ancillary plant shutdown benefit, as described in § 1.411(d)–3(g)(2)(vi), is permitted to be provided in a qualified defined benefit plan only if the amount payable in any year prior to retirement does not exceed the amount payable annually under the participant’s accrued benefit expressed as an annual benefit commencing at normal retirement age and that the benefit may not be paid in a shorter or longer alternative form of payment. Under such a rule, for example, if a plan participant who is below the plan’s normal retirement age of 65 had an accrued benefit payable as a life annuity at age 65 of $1,000 a month, the plan would be permitted to provide an ancillary plant shutdown benefit payable as a temporary annuity in an amount up to $1,000 a month. In such a case, the ancillary plant shutdown benefit would be paid to the plan participant up until the annuity starting date for payment of the participant’s accrued benefit under the plan ( e.g., age 65 or some earlier age when the participant commences payment of the participant’s accrued benefit in the form of a qualified joint and survivor annuity or elects an alternative optional form). This illustration of an ancillary plant shutdown benefit is different from a subsidized early retirement benefit payable on the occurrence of a plant shutdown. ⁶

C. Contingent accruals and early retire- ment benefits . The guidance might also provide that, except for the payment of the accrued benefit in an optional form, a retirement-type benefit (and thus a retirement-type subsidy) is permitted to be provided in a qualified defined benefit plan only if the amount of the benefit is no greater than the unreduced accrued benefit provided under the plan. The guidance might also clarify the extent to which additional accruals are permitted, taking into account the backloading and vesting rules under § 411, if those accruals arise by reason of an event other than attainment of a specified age, performance of service, receipt or derivation of compensation, or the occurrence of death or disability ( e.g., if those additional accruals arise upon invol

untary termination of employment). The guidance also might clarify the extent to which early retirement benefits ( i.e., benefits payable before normal retirement age, but after severance from employment, that are not ancillary benefits) payable as a result of a plant shutdown event, an involuntary termination of employment, or another event similarly under the control of the employer are permitted to be provided in a qualified defined benefit plan.

IV. EFFECTIVE DATE

It is anticipated that the guidance under consideration in this notice would be prospective. No implication is intended that the consideration of these issues affects the application of current law.

V. COMMENTS REQUESTED

Comments regarding the guidance under consideration described in Part III of this notice are requested. Of particular interest to Treasury and the Service are comments regarding the extent to which qualified defined benefit plans currently offer the types of benefits described in Part III of this notice, and comments regarding any appropriate transition rules that should be included in the guidance.

Written comments should be submitted by May 13, 2007. Send submissions to CC:PA:LPD:PR, (Notice 2007–14), Room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, D.C. 20044. Comments may also be hand delivered Monday through Friday between the hours of 8:30 a.m. and 4:00 p.m. to: Internal Revenue Service, CC:PA:LPD:PR, (Notice 2007–14), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, DC. Alternatively, comments may be submitted via the Internet at notice.comments@irscounsel.treas.gov (Notice 2007–14). All comments will be available for public inspection.

DRAFTING INFORMATION

The principal authors of this notice are Pamela R. Kinard and Preston Rutledge of the Office of the Division Counsel/Associate Chief Counsel (Tax Exempt and Gov

6 An example of a subsidized early retirement benefit is the unreduced early retirement benefit described in Bellas v. CBS, Inc., 221 F.3d 517 (3d. Cir. 2000), cert. denied, 531 U.S. 1104 (2001) (holding that an early retirement benefit that is more valuable than an actuarially reduced normal retirement benefit and that is payable on occurrence of an unpredictable contingent event is a retirement-type subsidy, and therefore is protected under § 204(g) of the Employee Retirement Income Security Act of 1974).

February 12, 2007 503 2007–7 I.R.B.

.04 Authority to enter into closing agreements . Under the authority of § 7121, the Service may enter into a closing agreement with a taxpayer in respect of any internal revenue tax for any taxable period.