[12129]
June 28, 2000
TO: PENSION COMMITTEE No. 44-00
PENSION OPERATIONS ADVISORY COMMITTEE No. 44-00
MAY 4TH AND JUNE 12TH CONFERENCE CALL PARTICIPANTS
RE: INSTITUTE SUBMITS COMMENT LETTER ON PROPOSED SECTION 411(D)(6) RELIEF
Attached is a copy of the Institute’s comment letter addressing the Internal Revenue Service’s
proposed section 411(d)(6) regulations.1 These proposed regulations would provide special rules under
section 411(d)(6) to permit (1) the amendment of a defined contribution plan to eliminate forms of
distribution offered under the plan, (2) certain transfers between defined contribution plans that are not
currently permitted under the regulations, and (3) the modification of certain rights to in-kind
distributions. The comment letter reiterates certain points previously raised by the Institute in a prior
comment letter2 and raises points discussed with Institute members on May 4th and June 12th conference
calls.
Specifically, the Institute in its comments requests that the Service modify its proposal so that
plans eliminating optional forms of distribution need only offer a lump sum distribution option.
Alternatively, the Institute recommends that plans eliminating distribution options be required to provide
only a lump sum distribution and one extended form of distribution as options, regardless of whether that
extended form of distribution had been available in the plan. Such a rule would enable a plan sponsor to
select an extended form of distribution that best suits its current workforce. The Institute also suggests
that, at a minimum, the Service exempt plans involved in mergers, plan sponsors using a prototype
document and prototype sponsors from the requirement that the extended distribution form be one that
was previously offered in the plan. The Institute also recommends that plans of small businesses be
wholly exempt from any requirement to retain any extended distribution form.
Second, the letter, responding to questions raised in the IRS’s proposal, states that it would be
unnecessary for the Service to impose special rules, such as phase-in or age-based rules, for participants
near retirement age, because, given the availability of a lump sum distribution, these individuals can
replicate any extended form of distribution. Further, such rules would unnecessarily add administrative
burdens and delay the implementation of amendments that would simplify plans and provide cost savings
beneficial to plans and participants.
Third, with respect to the proposed rules addressing the distribution of in-kind securities, the
Institute recommends that the Service clarify that a plan sponsor need not create a list of participants
1 Institute Memorandum to Pension Committee No. 23-00 and Pension Operations Advisory Committee No. 24-00,
dated March 31, 2000.
2 Institute Memorandum to Pension Committee No. 55-98, dated August 28, 1998.
2holding the relevant securities. Finally, we renew the request made in our previous comment letter, that
the Service expand this guidance to address the elimination of in-service distribution options.
Russell G. Galer
Senior Counsel
Attachment
Attachment (in .pdf format)