The Internal Revenue Service (IRS) has proposed updates to the minimum present value requirements for defined benefit (DB) plan distributions.
The proposed regulations would provide guidance about changes made by the Pension Protection Act of 2006 (PPA) and would provide other modifications to these rules as well. They would amend the current final regulations under section 417(e) of the Internal Revenue Code regarding the minimum present value requirements of section 417(e)(3) in several areas.
The proposed regulations would update the existing regulatory provisions to reflect the statutory changes made by the PPA, including the new interest rates and mortality tables set forth in section 417(e)(3) and the exception from the valuation rules for certain applicable defined benefit plans set forth in section 411(a)(13). They clarify that the interest rates that are published by the Commissioner pursuant to the provisions as modified by PPA are to be used without further adjustment.
In addition, the proposed regulations would eliminate obsolete provisions of the regulations relating to the transition from pre-1995 law to the interest rates and mortality assumptions provided by the General Agreement on Tariffs and Trade (GATT). Furthermore, they make conforming changes to reflect the final regulations under section 417(e) that permit defined benefit plans to simplify the treatment of certain optional forms of benefit that are paid partly in the form of an annuity and partly in a more accelerated form. NEXT: Actuary describes other clarifying changes