Part III. Administrative, Procedural, and Miscellaneous

Notice 2017–72

2017 Required Amendments List for Qualified Retirement Plans

I. PURPOSE

This notice contains the Required Amendments List for 2017 (2017 RA List). Section 5 of Rev. Proc. 2016–37, 2016–29 I.R.B. 136, provides that, in the case of an individually designed plan, the remedial amendment period for a disqualifying provision arising as a result of a change in qualification requirements generally is extended to the end of the second calendar year that begins after the issuance of the Required Amendments List (RA List) in which the change in qualification requirements appears. Pursuant to section 5.05(3) of Rev. Proc. 2016–37, this notice provides that December 31, 2019, is generally the last day of the remedial amendment period with respect to a disqualifying provision arising as a result of a change in qualification requirements that appears on this 2017 RA List. As a result, under sections 8.01 and 5.05(3) of Rev. Proc. 2016–37, December 31, 2019, is also generally the plan amendment deadline for a disqualifying provision arising as a result of a change in qualification requirements that appears on the 2017 RA List. However, a later date may apply to a governmental plan (as defined in § 414(d)) pursuant to sections 8.01 and 5.06(3) of Rev. Proc. 2016–37.

II. BACKGROUND

Section 401(b) of the Internal Revenue Code (Code) provides a remedial amendment period during which a plan may be amended retroactively to comply with the qualification requirements under § 401(a). Section 1.401(b)–1 describes the disqualifying provisions that may be amended retroactively and the remedial amendment period during which retroactive amendments may be adopted. Those regulations

also grant the Commissioner the discretion to designate certain plan provisions as disqualifying provisions and to extend the remedial amendment period.

Rev. Proc. 2016–37 eliminates, as of January 1, 2017, the five-year remedial amendment cycle system for individually designed plans that was set forth in Rev. Proc. 2007–44, 2007–2 C.B. 54.

Sections 5.05(3) and 5.06(3) of Rev. Proc. 2016–37 extend the remedial amendment period for individually designed plans to correct disqualifying provisions that arise as a result of a change in qualification requirements. Under section 5.05(3), the remedial amendment period for a plan that is not a governmental plan (as defined in § 414(d)) is extended to the end of the second calendar year that begins after the issuance of the RA List on which the change in qualification requirements appears. Section 5.06(3) provides a special rule for governmental plans that could further extend the remedial amendment period in some cases.

Section 8.01 of Rev. Proc. 2016–37 provides that the plan amendment deadline with respect to a disqualifying provision described in section 5 of Rev. Proc. 2016–37 is the date on which the remedial amendment period ends with respect to that disqualifying provision.

Section 9 of Rev. Proc. 2016–37 provides that the Department of the Treasury (the Treasury Department) and the Internal Revenue Service (IRS) intend to publish annually an RA List. In general, a change in qualification requirements will not appear on an RA List until guidance with respect to that change (including, in certain cases, model amendments) has been provided in regulations or in other guidance published in the Internal Revenue Bulletin. However, in the discretion of the Treasury Department and the IRS, a change in qualification requirements may be included on an RA List in other circumstances, such as in cases in which a statutory change is enacted and the Trea

sury Department and the IRS anticipate that no guidance will be issued.

III. CONTENT AND ORGANIZATION OF RA LIST

In general, an RA List includes statutory and administrative changes in qualification requirements that are first effective during the plan year in which the list is published. ¹ However, an RA List does not include guidance issued or legislation enacted after the list has been prepared and also does not include:

• Statutory changes in qualification requirements for which the Treasury Department and the IRS expect to issue guidance (which would be included on an RA List issued in a future year);

• Changes in qualification requirements that permit (but do not require) optional plan provisions (in contrast to changes in the qualification requirements that cause existing plan provisions, which may include optional plan provisions previously adopted, to become disqualifying provisions); ² or

• Changes in the tax laws affecting qualified plans that do not change the qualification requirements under § 401(a) (such as changes to the tax treatment of plan distributions, or changes to the funding requirements for qualified plans). The RA List is divided into two parts. Part A covers changes in qualification requirements that generally would require an amendment to most plans or to most plans of the type affected by the change.

Part B includes changes in qualification requirements that the Treasury Department and the IRS anticipate will not require amendments to most plans, but might require an amendment because of an unusual plan provision in a particular plan. If a change affects a particular qualification requirement that most plans incorporate by reference, Part B would include the change because a particular plan might not incorporate the qualification re

1RA Lists also may include changes in qualification requirements that were first effective in a prior year that were not included on a prior RA List under certain circumstances, such as changes in qualification requirements that were issued or enacted after the prior year’s RA List was prepared.

2The remedial amendment period and plan amendment deadline for discretionary changes to the terms of a plan are governed by sections 5.05(2), 5.06(2), and 8.02 of Rev. Proc. 2016-37, and are not affected by the inclusion of a change in qualification requirements on an RA List.

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quirement by reference and, thus, might contain language inconsistent with the change. For example, as provided in the 2016 RA List, if a defined benefit plan incorporates the limitation of § 436(d)(2) by reference to the statute or regulations (or through the use of the sample amendment in Notice 2011–96, 2011–52 I.R.B. 915), no amendment to the plan would be required to comply with the changes made by section 2003 of the Highway Transportation and Funding Act of 2014. P.L. 113– 159. However, a plan that sets forth the substantive requirements of § 436(d)(2) and that does not incorporate the limitation of § 436(d)(2) by reference to the statute or regulations, or through the use of the sample amendment in Notice 2011– 96, may need to be amended. Annual, monthly, or other periodic changes to (1) the various dollar limits that are adjusted for cost of living increases as provided in § 415(d) or other Code provisions, (2) the spot segment rates used to determine the applicable interest rate under § 417(e)(3), and (3) the applicable mortality table under § 417(e)(3), are treated as included on the RA List for the year in which such changes are effective even though they are not directly referenced on that RA List. The Treasury Department and the IRS anticipate that few plans have language that will need to be amended on account of these changes.

The fact that a change in a qualification requirement is included on the RA List does not mean that a plan must be amended as a result of that change. Each plan sponsor must determine whether a particular change in a qualification requirement requires an amendment to its plan.

IV . 2017 REQUIRED AMENDMENTS LIST

Part A. Changes in qualification require-

ments that generally would re- quire an amendment to most plans or to most plans of the type af- fected by the change .

• Final regulations regarding cash bal- ance/hybrid plans (79 Fed. Reg. 56442, 80 Fed. Reg. 70680). Cash balance/hybrid plans must be amended to the extent necessary to comply with those portions of the regulations regarding market rate of return and other

requirements that first become applicable to the plan for the plan year beginning in 2017. (This requirement does not apply to those collectively bargained plans that do not become subject to these portions of the regulations until 2018 or 2019 under the extended applicability dates provided in § 1.411(b)(5)–1(f)(2)(B)(3).) Note : The relief from the anti-cutback requirements of § 411(d)(6) provided in § 1.411(b)(5)–1(e)(3)(vi) applies only to plan amendments that are adopted before the effective date of these regulations. Note : See also Notice 2016–67, 2016–47 I.R.B. 748, which addresses the applicability of the market rate of return rules to implicit interest pension equity plans.

• Benefit restrictions for certain defined benefit plans that are eligible cooper- ative plans or eligible charity plans described in section 104 of the Pen- sion Protection Act of 2006, as amended (PPA) . An eligible cooperative plan or eligible charity plan that was not subject to the benefit restrictions of § 436 for the 2016 plan year under § 104 of PPA ordinarily becomes subject to those restrictions for plan years beginning on or after January 1, 2017. However, a plan that fits within the definition of a “CSEC plan” (as defined in § 414(y)) continues not to be subject to those rules unless the plan sponsor has made an election for the plan not to be treated as a CSEC plan.

Part B. Other changes in qualification re-

quirements that may require an amendment.

• Final regulations regarding partial annuity distribution options for de- fined benefit pension plans (81 Fed. Reg. 62359) . Defined benefit plans that permit benefits to be paid partly in the form of an annuity and partly as a single sum (or other accelerated form) must do so in a manner that complies with the § 417(e) regulations. Section 1.417(e)–1(d)(7) provides rules under which the minimum present value rules of § 417(e)(3) apply to the distribution of only a portion of a participant’s accrued benefit. Section

1.417(e)–1(d)(7) applies to distributions with annuity starting dates in plan years beginning on or after January 1, 2017, but taxpayers may elect to apply § 1.417(e)–1(d)(7) with respect to any earlier period. Note : The regulations provide relief from the anti-cutback rules of § 411(d)(6) for certain amendments adopted on or before December 31, 2017. Note : Model amendments that a sponsor of a qualified defined benefit plan may use to amend its plan to offer bifurcated benefit distribution options in accordance with these final regulations are provided in Notice 2017– 44, 2017–36 I.R.B. 226.

V. DRAFTING INFORMATION

The principal author of this notice is Angelique Carrington of the Office of Associate Chief Counsel (Tax Exempt and Government Entities). For further information regarding this notice, contact Ms. Carrington at (202) 317-4148 (not a tollfree number).

Notice 2017–75

Guidance Under Section 409A for Pre-2009 Section 457A Deferrals

I. Purpose

This notice provides guidance on the application of Internal Revenue Code (Code) section 409A with respect to amounts that are includible in income pursuant to section 801(d)(2) of the Tax Extenders and Alternative Minimum Tax Relief Act of 2008, Div. C of Pub. L. No. 110–343 (TEAMTRA). Section 801(a) of TEAMTRA added section 457A to the Code. Section 457A generally applies to deferred amounts that are attributable to services performed after December 31, 2008. However, if section 457A does not apply to a deferred amount solely because the amount is attributable to services performed before 2009, section 801(d)(2) of TEAMTRA provides that the amount is includible in gross income in the later of the last taxable year beginning before 2018 or the taxable year of vesting. This guidance provides that a nonqualified de

December 26, 2017 602 Bulletin No. 2017–52

ferred compensation plan that is subject to the provisions of Code section 409A will not fail to meet the requirements of section 409A solely because payments of deferred amounts under the plan are accelerated to pay income taxes on the amounts includible in income pursuant to section 801(d)(2) of TEAMTRA. This notice is intended to supplement, not supersede or modify, the guidance provided in Notice 2009–8, 2009–4 IRB 347 (Jan. 26, 2009).

II. Background

A. Section 457A and Section 801(d)(2) of TEAMTRA

Section 457A generally provides that compensation deferred under a nonqualified deferred compensation plan of a nonqualified entity is includible in gross income when there is no substantial risk of forfeiture of the rights to such compensation. For this purpose, section 457A(d)(3) provides that the term “nonqualified deferred compensation plan” has the meaning provided under section 409A(d), subject to certain modifications, and section 457A(b) provides that the term “nonqualified entity” means (1) any foreign corporation unless substantially all of its income is (a) effectively connected with the conduct of a trade or business in the United States, or (b) subject to a comprehensive foreign income tax, and (2) any partnership unless substantially all of its income is allocated to persons other than (a) foreign persons with respect to whom such income is not subject to a comprehensive foreign income tax, and (b) taxexempt organizations.

Section 457A was added to the Code by section 801(a) of TEAMTRA, which was enacted on October 3, 2008. Section 801(d)(1) of TEAMTRA provides that “the amendments made by this section shall apply to amounts deferred which are attributable to services performed after December 31, 2008.” Section 801(d)(2) of TEAMTRA further provides, however, that “any amount deferred to which the amendments made by this section do not apply solely by reason of the fact that the amount is attributable to services performed before January 1, 2009, to the extent such amount is not includible in gross income in a taxable year beginning

before 2018, . . . shall be includible in gross income in the later of - (A) the last taxable year beginning before 2018, or (B) the taxable year in which there is no substantial risk of forfeiture of the rights to such compensation . . . .”

B. Section 409A and Accelerated Distributions

Section 409A(a)(3) provides that, except as provided in regulations issued by the Secretary, a nonqualified deferred compensation plan may not permit the acceleration of the time or schedule of any payment under the plan. Section 1.409A– 3(j) provides that a nonqualified deferred compensation plan may permit the acceleration of the time or schedule of any payment only pursuant to an exception provided in § 1.409A–3(j)(4). Section 1.409A–3(j)(4) does not provide an exception that allows a service provider to receive an accelerated distribution to pay income taxes due on amounts includible in income under section 801(d)(2) of TEAMTRA.

C. Notice 2009–8 and the Application of Section 409A to Pre-2009 Section 457A Deferrals

Notice 2009–8, Q&A–25 provides that, for deferred amounts attributable to services performed before January 1, 2009, that are required to be included in gross income in the later of the last taxable year beginning before 2018 or the taxable year in which there is no substantial risk of forfeiture of the rights to the compensation (pre-2009 section 457A deferrals), a change in the time and form of payment to conform the date of distribution to the date the amount may be required to be included in income under section 801(d)(2) of TEAMTRA will not be treated as an impermissible acceleration under section 409A(a)(3) and § 1.409A–3(j) provided that the change in the time and form of payment was established in writing and effective on or before December 31, 2011. In addition, Notice 2009–8, Q&A–25 provides that, to the extent a deferred amount attributable to services performed before January 1, 2009, was earned and vested before December 31, 2004, and is not otherwise subject to the requirements of section

409A due to the effective date rules under § 1.409A–6, a change in the time and form of payment solely to conform the date of distribution to the date the amount may be required to be included in income under section 801(d)(2) of TEAMTRA is not treated as a material modification of the arrangement under § 1.409A–6(a)(4) provided that the change in the time and form of payment is established in writing and effective on or before December 31, 2011.

III. Guidance Permitting Accelerated Distributions to Pay Income Taxes on Pre-2009 Section 457A Deferrals

Pursuant to the authority provided in section 409A(a)(3), the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) intend to issue regulations applicable as of December 08, 2017 providing the relief set forth in this paragraph; taxpayers may rely on the relief described in this paragraph until the regulations are finalized. The regulations will permit the acceleration of payments under a nonqualified deferred compensation plan to pay Federal, state, local, and foreign income taxes due on pre-2009 section 457A deferrals that are includible in gross income. Specifically, the Treasury Department and the IRS intend to issue regulations providing that a change in the time and form of payment under a nonqualified deferred compensation plan to pay Federal, state, local, and foreign income taxes on pre-2009 section 457A deferrals will not be treated as an impermissible acceleration under section 409A(a)(3) and § 1.409A–3(j)(1). These regulations will also provide that, to the extent a deferred amount attributable to services performed before January 1, 2009, was earned and vested before December 31, 2004, and is not otherwise subject to the requirements of section 409A due to the effective date rules under § 1.409A–6, a change in the time and form of payment of the deferred amount to pay Federal, state, local, and foreign income taxes on pre-2009 section 457A deferrals will not be treated as a material modification of such arrangement under § 1.409A–6(a)(4). The relief provided in these regulations will apply only to the extent that that the amount of any distribution to pay Fed

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eral, state, local, and foreign income taxes on pre-2009 section 457A deferrals is not more than an amount equal to the Federal, state, local, and foreign income tax withholding that would have been remitted by an employer if there had been a payment of wages equal to the income includible by the service provider under section 801(d)(2) of TEAMTRA.

IV. Drafting Information

The principal author of this notice is William McNally of the Office of Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the Treasury Department and the IRS participated in its development. For further information regarding this notice, contact Mr. McNally at (202) 317-5600 (not a toll-free number).

Notice 2017–76

Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the Internal Revenue Code. In addition, this

notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I).

YIELD CURVE AND SEGMENT RATES

Generally, except for certain plans under section 104 of the Pension Protection Act of 2006 and CSEC plans under § 414(y), § 430 of the Code specifies the minimum funding requirements that apply to single-employer plans pursuant to § 412. Section 430(h)(2) specifies the interest rates that must be used to determine a plan’s target normal cost and funding target. Under this provision, present value is generally determined using three 24month average interest rates (“segment rates”), each of which applies to cash flows during specified periods. To the extent provided under § 430(h)(2)(C)(iv), these segment rates are adjusted by the applicable percentage of the 25-year average segment rates for the period ending September 30 of the year preceding the calendar year in which the plan year begins. ³ However, an election may be made under § 430(h)(2)(D)(ii) to use the monthly yield curve in place of the segment rates.

Notice 2007–81, 2007–44 I.R.B. 899, provides guidelines for determining the

monthly corporate bond yield curve, and the 24-month average corporate bond segment rates used to compute the target normal cost and the funding target. Consistent with the methodology specified in Notice 2007–81, the monthly corporate bond yield curve derived from November 2017 data is in Table 2017–11 at the end of this notice. The spot first, second, and third segment rates for the month of November 2017 are, respectively, 2.20, 3.57, and 4.24.

The 24-month average segment rates determined under § 430(h)(2)(C)(i) through (iii) must be adjusted pursuant to § 430(h) (2)(C)(iv) to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates. For plan years beginning before 2021, the applicable minimum percentage is 90% and the applicable maximum percentage is 110%. The 25-year average segment rates for plan years beginning in 2016, 2017, and 2018 were published in Notice 2015–61, 2015–39 I.R.B. 408, Notice 2016–54, 2016–40 I.R.B. 429, and Notice 2017–50, 2017–41 I.R.B. 280, respectively.

24-MONTH AVERAGE CORPORATE BOND SEGMENT RATES

The three 24-month average corporate bond segment rates applicable for December 2017 without adjustment for the 25year average segment rate limits are as follows:

24-Month Average Segment Rates Without 25-year Average Adjustment

Applicable Month First Segment Second Segment Third Segment

December 2017 1.79 3.70 4.56

Based on § 430(h)(2)(C)(iv), the 24-month averages applicable for December 2017, adjusted to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates, are as follows:

Adjusted 24-Month Average Segment Rates

For Plan Years

Plan Years First Second Third

In Applicable Month Segment Segment Segment

2016 December 2017 4.43 5.91 6.65

2017 December 2017 4.16 5.72 6.48

2018 December 2017 3.92 5.52 6.29

Second Segment

Beginning In

Applicable Month

First Segment

3Pursuant to § 433(h)(3)(A), the 3rd segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount of the full funding limitation under § 433(c)(7)(C)).

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30-YEAR TREASURY SECURITIES INTEREST RATES

Generally for plan years beginning after 2007, § 431 specifies the minimum funding requirements that apply to multiemployer plans pursuant to § 412. Section 431(c)(6)(B) specifies a minimum amount for the full-funding limitation described in § 431(c)(6)(A), based on the plan’s current liability. Section 431(c)(6)(E)(ii)(I) provides that the interest rate used to calculate current liability

for this purpose must be no more than 5 percent above and no more than 10 percent below the weighted average of the rates of interest on 30-year Treasury securities during the four-year period ending on the last day before the beginning of the plan year. Notice 88–73, 1988–2 C.B. 383, provides guidelines for determining the weighted average interest rate. The rate of interest on 30-year Treasury securities for November 2017 is 2.80 percent. The Service determined this rate as the average of the daily determinations of

yield on the 30-year Treasury bond maturing in August 2047 determined each day through November 8, 2017 and the yield on the 30-year Treasury bond maturing in November 2047 determined each day for the balance of the month. For plan years beginning in December 2017, the weighted average of the rates of interest on 30-year Treasury securities and the permissible range of rates used to calculate current liability are as follows:

Permissible Range

Treasury Weighted Average Rates

For Plan Years 30-Year Treasury

Beginning In Weighted Average 90% to 105%

December 2017 2.85 2.57 to 3.00

Beginning In

30-Year Treasury Weighted Average

MINIMUM PRESENT VALUE SEGMENT RATES

In general, the applicable interest rates under § 417(e)(3)(D) are segment rates

computed without regard to a 24-month average. Notice 2007–81 provides guidelines for determining the minimum present value segment rates. Pursuant to that notice, the minimum present value seg

ment rates determined for November 2017 are as follows:

2017 are as follows:

Minimum Present Value Segment Rates

Month First Segment Second Segment Third Segment

November 2017 2.20 3.57 4.24

DRAFTING INFORMATION

The principal author of this notice is Tom Morgan of the Office of the Associ

ate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS participated in the development of this guidance. For further

information regarding this notice, contact Mr. Morgan at 202-317-6700 or Tony Montanaro at 202-317-8698 (not toll-free calls).

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Table 2017–11 Monthly Yield Curve for November 2017

Derived from November 2017 Data

Maturity Yield Maturity Yield Maturity Yield Maturity Yield Maturity Yield

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