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an executed copy of the amended plan. Line 12a of Form 5300
asked the following question: “Does any amendment to the plan
reduce or eliminate any section 411(d)(6) protected benefit?” In
response to this question, Hercules checked the “No” box.
Hercules completed the Form 5300 on or about January 31, 2002.
On or about March 19, 2002, petitioner, as an interested
party, sent a letter to the IRS regarding the “Application for
Determination Letter Submitted February 15, 2002 by Hercules
Incorporated”. Petitioner made, in pertinent part, the following
statements in this letter:
I have been advised that the application for an
advance determination letter was filed on February 15,
2002 pursuant to the “Notice To Eligible Employees Of
Hercules Incorporated.”
The pension plan provides for the payment in a
lump sum of the actuarial value of 51% of a
participant’s monthly pension benefit. In 2001,
Hercules amended its plan to provide that the lump-sum
benefit will be computed based on the 30-year Treasury
bond rate for service prior to the date of that
amendment. Prior to the 2001 amendment, the value was
computed using the PBGC rate. I have been informed
that the use of the 30-year Treasury bond rate, instead
of the PBGC rate, is an illegal cutback under
Section 411(d)(6) of the Code and applicable
regulations and rulings. Accordingly, the pension plan
does not satisfy the requirements as a qualified plan.
Therefore, a favorable determination letter should not
be issued until and unless the plan is changed to
provide the anticutback protection required by the
applicable regulations and rulings regarding the proper
interest rate to be used in determining the actuarial
equivalent value for service prior to the date of a
proper amendment.
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