what is the scope of the 411(d)(6) relief granted for switching from P

[Guest janie]

I am doing the GUST amendments to a DB plan where the only lump sum distributions permitted are involuntary cash-outs where the present value of the accrued benefit is under the cash-out limit. As amended for TRA '86, the plan provided in the specific provision governing cash-outs for use of the "applicable PBGC rate" determined as of the proposed distribution date. Elsewhere, in a general catch-all provision governing actuarial factors to be applied in general under the plan, it provides for use of an 8% interest rate and 1971 group annuity table (based on 50% male/50% female rates) with the exception that in calculating any lump-sum payment the interest rate to be used will be the interest rates for Valuation of Plan Benefits published for the preceding January 1 by the PBGC for purposes of valuing benefits with respect to immediate annuities under terminating plans covered by Title IV. I believe that this latter provision must have been retained in the plan for 411(d)(6) reasons -- in particular, it seems from reading IRS Notice 87-20 that the 411(d)(6) relief granted there w/re to the switch from the use of the immediate PBGC rate required under 1.417(e)-1T (the temporary regs issued under REA) for 1985 and 1986 to the "applicable PBGC rates" required under Section 1139 of TRA '86 was specifically conditioned upon not changing the date that the rate was to be determined. Here, the date was changed from January 1 of the year of a distribution to the actual distribution date. My question is, under the 417(e) regs as amended to reflect GATT, and in particular the 411(d)(6) relief granted there for switching from applicable PBGC rates to GATT rates, do you think that that relief also applies where the plan kept the immediate PBGC rate for January 1 of the year of a distribution as an alternative? In other words, can I substitute GATT rates for PBGC rates across-the-board under this plan without continuing to protect the use of the immediate PBGC rate for the preceding January 1 that seems to have been kept in the plan because there was no 411(d)(6) relief granted w/re to it back when the TRA '86 amendments were made? I have puzzled and puzzled over the 417(e) regs on this point and am nearly going crazy, so any help would be enormously appreciated!!! Many thanks for any thoughts.

[Guest]

Why isn't this an "interest rate based on the PBGC interest rate" that can be eliminated without concern under the regulations? The notion for allowing PBGC rates to be eliminated was the belief when the regs were issued that the PBGC would no longer publish its rates after 1999. Thus, the IRS was very generous in allowing mutant forms of the PBGC rate to be eliminated. I would think you are o.k. IMHO.

[Gary]

Let me get this straight. Are you saying that the Plan (prior to GATT) provides for both the PBGC rates as of ASD and as of 1/1, whichever produces larger amount? It seems if you switch to GATT, and eliminate PBGC rates all together, then in the first year, you probably would have to use the GATT rate for say two months prior to ASD and two months prior to 1/1. That is at both points in time and pay the larger amount. Then in subsequent years, you could choose the one time for establishing the rate.