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Regs. As relevant here, section 1.417(e)-1(d)(10)(iv), Income
Tax Regs., provides as follows:
(iv) Section 411(d)(6) relief for plan amendments
pursuant to changes to section 417 made by RPA ‘94
providing for prior determination date or up to two
months earlier. Notwithstanding the general rule of
paragraph (d)(10)(i) of this section, except as
provided in paragraph (d)(10)(vi)(B) of this section
[relating to the replacement of a non-PBGC interest
rate], a participant’s accrued benefit is not
considered to be reduced in violation of section
411(d)(6) merely because of a plan amendment that
changes any interest rate or mortality assumption used
to calculate the present value of a participant’s
benefit under the plan, if the following conditions are
satisfied–-
(A) The amendment replaces the PBGC interest
rate (or an interest rate or rates based on the PBGC
interest rate) as the interest rate used under the plan
in determining the present value of a participant’s
benefit under this paragraph (d); and
(B) After the amendment is effective, the
present value of a participant’s benefit under the plan
cannot be less than the amount calculated using the
applicable mortality table and the applicable interest
rate, but only if the applicable interest rate is the
annual interest rate on 30-year Treasury securities for
the calendar month that contains the date as of which
the PBGC interest rate (or an interest rate or rates
based on the PBGC interest rate) was determined
immediately before the amendment, or for one of the two
calendar months immediately preceding such month.
Hercules’ amendment to the lump-sum payment option fits
squarely within the safe harbor provided by section
1.417(e)-1(d)(10)(iv), Income Tax Regs. Specifically, the
amendment to the lump-sum payment option (1) replaces an interest
rate based on the PBGC interest rate; (2) provides that the
present value of a participant’s accrued benefit shall be no less
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