>The regulation – T.D. 9176 – contains amendments that were added to Section 411(d)(6)(E) under the Economic Growth and Tax Relief Reconciliation Act of 2001. They become effective immediately.
>The basic regulation stipulated that reducing the ways in which a defined contribution plan participant can have distributions paid out does not violate anti-cutback rules if it is replaced with a single-sum distribution that is the same or greater than the eliminated distribution.
>A previous regulatory issuance – T.D. 8900 – said that plan sponsors could shift the form of distribution if they gave a participant 90 days notice (See FINAL FORM – IRS Issues Final Regs on Alternate Payment Forms ). The final regulations outlined in T.D. 9176 make it clear that the 90-day notice requirement no longer applies if the lump-sum option being put in the place of the discontinued distribution method is based on the “same or greater portion of the participant’s account.”
>The IRS noted that some commentators worried that removing the 90-day notice requirement would cause some plan participants expecting to utilize an annuity to suddenly discover that the option was gone. Despite these concerns, the final regulations “…remove the 90-day notice condition previously applicable to these plan amendments,” according to the notice.