Section 3. Determination of Amount to be Distributed Each Year.

Section 3.1. General Annuity Requirements. If the participant’s interest is to be paid in the form of annuity distributions under the plan, payments under the annuity shall satisfy the following requirements:

(a) the annuity distributions will be paid in periodic payments made at uniform intervals not longer than one year;

(b) the distribution period will be over a life (or lives) or over a period certain not longer than the period described in section 4 or 5;

(c) once payments have begun over a period, the period will be changed only in accordance with section 6 of this article;

(d) payments will either be nonincreasing or increase only as follows:

(i) by an annual percentage increase that does not exceed the percentage increase in an eligible cost-of-living index for a 12-month period ending in the year during which the increase occurs or a prior year;

(ii) by a percentage increase that occurs at specified times and does not exceed the

cumulative total of annual percentage increases in an eligible cost-of-living index since the annuity starting date, or if later, the date of the most recent percentage increase;

(Note to reviewer: If the plan provides the cumulative increase to the annuity described in (ii) above, it may not provide an actuarial increase to reflect the fact that increases were not provided in the interim years.)

(iii) by a constant percentage of less than 5% per year, applied not less frequently than

annually;

(iv) as a result of dividend or other payments that result from actuarial gains, provided:

I. actuarial gain is measured not less frequently than annually,

II. the resulting dividend or other payments are either paid no later than the year following the year for which the actuarial experience is measured or paid in the

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same form as the payment of the annuity over the remaining period of the annuity (beginning no later than the year following the year for which the actuarial experience is measured),

III. the actuarial gain taken into account is limited to actuarial gain from investment experience,

IV. the assumed interest rate used to calculate such actuarial gains is not less than 3%, and

V. the annuity payments are not increased by a constant percentage as described in (3) of this section 3.1(d);

(vi) to the extent of the reduction in the amount of the participant’s payments to provide

for a survivor benefit, but only if there is no longer a survivor benefit because the beneficiary whose life was being used to determine the distribution period described in section 4 dies or is no longer the participant’s beneficiary pursuant to a qualified domestic relations order within the meaning of Code § IRC 414(p);

(vii) to provide a final payment upon the participant’s death not greater than the excess of

the actuarial present value of the participant’s accrued benefit (within the meaning of Code § IRC 411(a)(7)) calculated as of the annuity starting date using the applicable interest rate defined in section _____ of the plan and the applicable mortality table defined in section _____ of the plan (or, if greater, the total amount of employee contributions) over the total of payments before the participant’s death;

(Note to reviewer: The blanks above should be filled in with the section numbers of the plan that specify, respectively, the applicable interest rate and applicable mortality table and that correspond, respectively, to sections 2 and 3 of LRM #42.)

(viii) to allow a beneficiary to convert the survivor portion of a joint and survivor annuity

into a single sum distribution upon the participant’s death; or

(ix) to pay increased benefits that result from a plan amendment.

Section 3.2. Amount Required to be Distributed by Required Beginning Date and Later Payment Intervals. The amount that must be distributed on or before the participant’s required beginning date (or, if the participant dies before distributions begin, the date distributions are required to begin under section 2.2(a) or (b)) is the payment that is required for one payment interval. The second payment need not be made until the end of the next payment interval even if that payment interval ends in the next calendar year. All of the participant’s benefit accruals as of the last day of the first distribution calendar year will be included in the calculation of the amount of the annuity payments for payment intervals ending on or after the participant’s required beginning date.

Section 3.3. Additional Accruals After First Distribution Calendar Year. Unless due to an administrative delay that complies with Treas. Reg.Any1 .401(a)(9)-6(e)(2), any additional benefits accruing to the participant in a calendar year after the first distribution calendar year will be distributed beginning with the first payment interval ending in the calendar year immediately following the calendar year in which such benefit accrues.

285 | Defined Benefit Plan LRM Package 08/2020 06/2026