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1.417(e)-1T(d) for the amount of a distribution under a
nondecreasing annuity payable for a period not less
than the life of the participant or, in the case of a
QPSA, the life of the surviving spouse. For purposes
of this exception, a nondecreasing annuity included a
QJSA, a QPSA, and an annuity that decreased merely
because of the cessation or reduction of Social
Security supplements or qualified disability payments
(as defined in section 411(a)(9)). This exception was
identical to the exception provided under former final
regulations. Several commentators pointed out that
this exception did not cover several other types of
annuity forms of distribution that were nondecreasing
during the life of the participant, and suggested that
the regulations be changed to provide additional
exceptions for these additional annuity forms of
distribution.
The IRS and Treasury have determined that it is
appropriate to provide additional exceptions for these
benefit forms. Accordingly, under the final
regulations, section 417(e)(3) and sec. 1.417(e)-1(d)
do not apply to the amount of a distribution paid in
the form of an annual benefit that does not decrease
during the life of the participant, or, in the case of
a QPSA, the life of the participant’s spouse; or that
decreases during the life of the participant merely
because of the death of the survivor annuitant (but
only if the reduction is to a level not below 50% of
the annual benefit payable before the death of the
survivor annuitant) or merely because of the cessation
or reduction of Social Security supplements or
qualified disability benefits. * * * [T.D. 8768,
1998-1 C.B. 1027, 1028.]
This conclusion is further supported by the commonsense notion
that, because section 417(e) specifically deals with the
calculation of the present value of a participant’s accrued
benefit for purposes of determining the amount of a lump-sum
payment to that participant, lump-sum payments would not be
excepted from the present value requirements of section
1.417(e)-1(d), Income Tax Regs. Therefore, because the lump-sum
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