60. Amendments affecting vested and/or accrued benefits

Statement of Requirement: Code §§ 411(a)(10)(A), 411(d)(6); Reg. § 1.411(d)-4, Q&A-2(e); Rev. Proc. 2017-41R ev. Proc. 2023-37, 2023-51 I.R.B. 1491, sec. 9.02(2) 5.04

Sample Plan Language:

No amendment to the plan shall be effective to the extent that it has the effect of decreasing a participant's accrued benefit. This includes a plan amendment that decreases a participant’s accrued benefit, or otherwise places greater restrictions or conditions on a participant’s rights to section 411(d)(6) protected benefits, even if the amendment merely adds a restriction or condition that is permitted under the vesting rules in section 411(a)(3) through (11). Notwithstanding the preceding sentence, a participant's account balance may be reduced to the extent permitted under section 412(d)(2) of the Code or to the extent permitted under sections 1.411(d)-3 and 1.411(d)-4 of the regulations. For purposes of this paragraph, a plan amendment which has the effect of decreasing a participant's account balance, with respect to benefits attributable to service before the

269 | D e f i n e d C o n t r i b u t i o n P l a n L R M P a c k a g e 0 1 / 2 0 2 4

amendment, shall be treated as reducing an accrued benefit. Furthermore, if the vesting schedule of a plan is amended, in the case of an employee who is a participant as of the later of the date such amendment is adopted or the date it becomes effective, the nonforfeitable percentage (determined as of such date) of such employee's employerderived accrued benefit will not be less than the percentage computed under the plan without regard to such amendment.

No amendment to the plan shall be effective to eliminate or restrict an optional form of benefit. The preceding sentence shall not apply to a plan amendment that eliminates or restricts the ability of a participant to receive payment of his or her account balance under a particular optional form of benefit if the amendment provides a single-sum distribution form that is otherwise identical to the optional form of benefit being eliminated or restricted. For this purpose, a single-sum distribution form is otherwise identical only if the single-sum distribution form is identical in all respects to the eliminated or restricted optional form of benefit (or would be identical except that it provides greater rights to the participant) except with respect to the timing of payments after commencement.

(Note to reviewer: Plan amendments may also provide exceptions from the general prohibition against the elimination or restriction of optional forms of benefit for in- kind distributions and elective transfers as specified under Reg. § 1.411(d)-4 Q&A 2 and 3.)

(Note to reviewer: Plans may provide for an exception from the general prohibition against the elimination or restriction of optional forms for certain elective transfers. If a plan provides for the elimination or restriction of optional forms for elective transfers made on or after January 1, 2002, the plan must also provide that where the participant is eligible to receive an immediate distribution of the participant’s entire nonforfeitable accrued benefit in a single-sum distribution that would consist entirely of an eligible rollover distribution under § 401(a)(31), such transfer will be accomplished as a direct rollover under § 401(a)(31). See Reg. § 1.411(d)-4, Q&A- 3(a)(4) & (c)(1)(ii). See also LRM #51.)