Subject: BenefitsLink Nwsltr 12/18/95 FULL TEXT OF ERISA ONLINE BenefitsLink offers an easy way to fetch the full text of any section of ERISA (the Employee Retirement Income Security Act of 1974, as amended), using hypertext links that automatically tap the new U.S. Government Printing Office database. Now there's no need to find the GPO Web site, go through their database page, or formulate your search query (or look up those darned cross-references to the proper Title 29 section number!). The new ERISA link appears on the Government Documents page (which is linked from the BenefitsLink home page at http://www.magicnet.net/benefits/ or you can go directly to the ERISA link at http://www.magicnet.net/benefits/erisa/index.html Coming soon -- similar links to IRS Code sections applicable to employee benefit plans! ***************************************************************** NEW REGULATIONS ON 204(h); THE ELVES WERE WORKING THIS PAST WEEKEND . . . New on BenefitsLink -- the full text of Friday's temporary IRS regulations addressing the notice that must be provided to employees before a plan sponsor can amend its pension plan to reduce the rate of benefit accrual. The notice is required by ERISA section 204(h) (as to which the IRS has authority to issue regulations, due to the reorganization plan of 1980). Interestingly, the regulation is indexed under Code section 411(d)(6), the "anti-cutback" statute. The regulations were printed in Friday's Federal Register. Included on BenefitsLink is the full "preamble" from that release, providing helpful background information about the new rules. The regulations became effective for amendments adopted on or after December 15, 1995, and to amendments that become effective on or after January 2, 1996. Included in the BenefitsLink copy of the release are hypertext jumps to the relevant ERISA statutes, newly available online from the U.S. Government Printing Office. The release is published at http://www.magicnet.net/benefits/taxregs/204h.html The following excerpt from the preamble hits the highlights: "Explanation of Provisions Section 204(h) of ERISA applies if a defined benefit plan or an individual account plan that is subject to the funding standards of section 302 of ERISA is amended to provide for a significant reduction in the rate of future benefit accrual. It requires the plan administrator to give written notice of the amendment to participants in the plan, alternate payees, and employee organizations representing participants in the plan (or to a person designated, in writing, to receive the notice on behalf of a participant, alternate payee, or employee organization). The notice must set forth the plan amendment and its effective date and must be provided after adoption of the amendment and not less than 15 days before the effective date of the amendment. * * * Section 204(h) of ERISA does not apply to an amendment that does not affect the rate of future benefit accrual. These regulations clarify that an amendment to a defined benefit plan that does not affect the annual benefit commencing at normal retirement age does not affect the rate of future benefit accrual for purposes of section 204(h). Accordingly, the regulations provide that the plan administrator of a defined benefit plan is not required to provide section 204(h) notice with respect to an amendment that does not affect the future annual benefit payable at normal retirement age, even if the amendment affects other forms of payment (such as a single sum distribution) or benefits commencing at a date other than normal retirement age (such as an early retirement benefit). The regulations also clarify that an amendment to an individual account plan that does not change the amount of future allocations to participants' accounts does not affect the rate of future benefit accrual for purposes of section 204(h) of ERISA. Accordingly, section 204(h) notice is not required with respect to any such amendment. * * * In situations in which section 204(h) notice is required with respect to an amendment, the regulations provide guidance on the participants, alternate payees, and employee organizations to whom the notice must be provided. Specifically, the regulations provide that the plan administrator is not required to provide notice to a participant or alternate payee whose rate of future benefit accrual is reasonably expected not to be reduced by the amendment. For example, notice need not be provided to participants (such as former employees with a vested benefit under the plan) who, prior to the amendment, were not entitled to accrue future benefits under the plan. Moreover, under the regulations, section 204(h) notice is not required to be provided to an employee organization unless it represents one or more participants to whom section 204(h) notice is required to be provided. Finally, the regulations clarify that employees who have not yet become participants in the plan are not taken into account for any purpose under section 204(h) of ERISA. [Footnote 1] Thus, the plan administrator is not required to provide section 204(h) notice to such employees. The regulations provide that a plan that is terminated in accordance with title IV of ERISA is deemed to satisfy section 204(h) not later than the date of termination established under section 4048 of ERISA. Accordingly, section 204(h) does not require that any further benefits accrue under the plan after that date. However, if that date of termination is deferred, benefits continue to accrue until the deferred date of termination absent an effective cessation of accruals as of an earlier specified date. If the plan is not amended to significantly reduce the rate of future benefit accrual prior to the termination, section 204(h) notice is not required. However, the regulations also affirm that section 204(h) applies to an amendment that is effective prior to the termination date and clarify that, if section 204(h) notice is required, it can be provided either with or as part of the notice of intent to terminate or separately. The regulations also provide two rules applicable in situations in which a plan administrator was required to provide section 204(h) notice with respect to an amendment but failed to provide timely notice to some of the parties to whom notice was required to be provided. The first rule applies when the plan administrator fails to provide timely notice with respect to more than a de minimis percentage of the parties to whom section 204(h) notice was required. In such a situation, the amendment becomes effective in accordance with its terms with respect to a participant to whom notice was required if the participant was provided with timely notice and any employee organization representing the participant was also provided with timely notice. The amendment also becomes effective in accordance with its terms with respect to an alternate payee to whom notice was required if the alternate payee was provided with timely notice. The second rule applies in a situation in which the plan administrator made a good faith effort to comply with section 204(h) of ERISA with respect to an amendment, failed to provide timely section 204(h) notice to no more than a de minimis percentage of the parties to whom notice was required, and provided timely notice to all employee organizations with respect to whom section 204(h) notice was required. In such a situation, if the plan administrator, promptly upon discovery of the omission, provides section 204(h) notice to all parties who were required to be provided such notice but were omitted, the plan amendment becomes effective in accordance with its terms with respect to all parties to whom section 204(h) notice was required, including those who did not receive notice prior to discovery of the omission." ************************************************************** To subscribe or unsubscribe to the free BenefitsLink newsletter, send email to erisa@magicnet.net. Best regards, Dave Baker BenefitsLink - The National Employee Benefits Web Page http://www.magicnet.net/benefits