Td 9076

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Federal Register / Vol. 68, No. 136 / Wednesday, July 16, 2003 / Rules and Regulations

Issued in Kansas City, Missouri, on July 7,
2003.
Michael Gallagher,
Manager, Small Airplane Directorate, Aircraft
Certification Service.
[FR Doc. 03–17566 Filed 7–15–03; 8:45 am]
BILLING CODE 4910–13–P

DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration

On page 38592, in the first column,
under Initial Inspection heading,
paragraph (f), fifth line, which reads ‘‘no
later than July 15, 2003, in accordance
* * * ’’ is corrected to read ‘‘no later
than July 31, 2003, in accordance
* * * ’’.
Issued in Burlington, MA, on July 10, 2003.
Francis A. Favara,
Acting Manager, Engine and Propeller
Directorate, Aircraft Certification Service.
[FR Doc. 03–17950 Filed 7–15–03; 8:45 am]

14 CFR Part 39

BILLING CODE 4910–13–P

[Docket No. 2003–NE–23–AD; Amendment
39–13210; AD 2003–13–10]

DEPARTMENT OF THE TREASURY

RIN 2120–AA64

Internal Revenue Service

Airworthiness Directives; Rolls-Royce
Corporation (formerly Allison Engine
Company, Allison Gas Turbine
Division, and Detroit Diesel Allison)
Models 250–C30R/3, –C30R/3M, –C47B,
and –C47M Turboshaft Engines;
Correction
AGENCY: Federal Aviation
Administration, DOT.
ACTION: Final rule; request for
comments, correction.

This document makes a
correction to Airworthiness Directive
(AD) 2003–13–10, applicable to RollsRoyce Corporation (formerly Allison
Engine Company, Allison Gas Turbine
Division, and Detroit Diesel Allison)
Models 250–C30R/3, –C30R/3M, –C47B,
and –C47M turboshaft engines. AD
2003–13–10 was published in the
Federal Register on June 30, 2003 (68
FR 38590). In the compliance section,
paragraph (f) incorrectly references a
compliance date of July 15, 2003 and
should reference a compliance date of
July 31, 2003. This document corrects
that date. In all other respects, the
original document remains the same.
EFFECTIVE DATE: July 15, 2003.
FOR FURTHER INFORMATION CONTACT:
Khailaa Hosny, Aerospace Engineer,
Chicago Aircraft Certification Office,
FAA, 2300 East Devon Avenue, Des
Plaines, IL 60018–4696; telephone (847)
294–7134; fax (847) 294–7834.
SUPPLEMENTARY INFORMATION: A final
rule; request for comments
airworthiness directive FR DOC. 03–
15993, applicable to Rolls-Royce
Corporation (formerly Allison Engine
Company, Allison Gas Turbine Division,
and Detroit Diesel Allison) Models 250–
C30R/3, –C30R/3M, –C47B, and –C47M
turboshaft engines, was published in the
Federal Register on June 30, 2003 (68
FR 38590). The following correction is
needed:
SUMMARY:

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26 CFR Parts 1 and 602
[TD 9076]
RIN 1545–AX34

Special Rules Under Section 417(a)(7)
for Written Explanations Provided by
Qualified Retirement Plans After
Annuity Starting Dates
AGENCY: Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
SUMMARY: This document contains final
regulations relating to the special rule
added by the Small Business Job
Protection Act of 1996 which permits
the required written explanations of
certain benefits to be provided by
qualified retirement plans to plan
participants after the annuity starting
date. These final regulations affect
sponsors and administrators of qualified
retirement plans, and participants in
those plans.
DATES: Effective Date: These regulations
are effective July 16, 2003.
Applicability Date: These regulations
apply to plan years beginning on or after
January 1, 2004.
FOR FURTHER INFORMATION CONTACT:
Robert Walsh (202) 622–6090 (not a tollfree number).
SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act
The collection of information
contained in these final regulations has
been reviewed and approved by the
Office of Management and Budget in
accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C.
3507(d)) under control number 1545–
1724.
The collection of information in this
final regulation is in § 1.417(e)–
1(b)(3)(iv)(B) and § 1.417(e)–
1(b)(3)(v)(A). This collection of

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information is required by the IRS to
ensure that the participant and the
participant’s spouse consent to a form of
distribution from a qualified retirement
plan that may result in reduced periodic
payments.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a valid control
number assigned by the Office of
Management and Budget.
Comments concerning the accuracy of
this burden estimate and suggestions for
reducing this burden should be sent to
the Internal Revenue Service, Attn: IRS
Reports Clearance Officer,
W:CAR:MP:T:T:SP, Washington, DC
20224, and to the Office of Management
and Budget, Attn: Desk Officer for the
Department of the Treasury, Office of
Information and Regulatory Affairs,
Washington, DC 20503.
Books or records relating to a
collection of information must be
retained as long as their contents might
become material in the administration
of any internal revenue law. Generally,
tax returns and tax return information
are confidential, as required by 26
U.S.C. 6103.
Background
This document contains amendments
to 26 CFR part 1 under section 417(a)(7).
On January 17, 2001, a notice of
proposed rulemaking (REG–109481–99)
was published in the Federal Register
(66 FR 3916) under section 417(a)(7) of
the Internal Revenue Code. No public
hearing was requested or held. Written
comments responding to the notice of
proposed rulemaking were received.
After consideration of all the comments,
the proposed regulations are adopted as
amended by this Treasury decision.
Section 401(a)(11) of the Internal
Revenue Code provides that, subject to
certain exceptions, all distributions
from a qualified plan must be made in
the form of a qualified joint and
survivor annuity (QJSA). One such
exception is provided in section 417,
which allows a participant to elect to
waive the QJSA in favor of another form
of distribution. Section 417(a)(2)
provides that, for the waiver to be valid,
the participant’s spouse must consent to
the waiver. Section 417(a)(3)(A) requires
a qualified plan to provide to each
participant, within a reasonable period
of time before the annuity starting date,
a written explanation (QJSA
explanation) that describes the QJSA,
the right to waive the QJSA, and the
rights of the participant’s spouse.
Section 417(a)(7), which was added to
the Code by section 1451(a) of the Small
Business Job Protection Act of 1996,

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Federal Register / Vol. 68, No. 136 / Wednesday, July 16, 2003 / Rules and Regulations
Public Law 104–188 (110 Stat. 1755)
(SBJPA), creates an exception to the
rules of section 417(a)(3)(A), effective
for plan years beginning after December
31, 1996. Section 417(a)(7)(A) provides
that, notwithstanding any other
provision of section 417(a), a plan may
furnish the QJSA explanation after the
annuity stating date, as long as the
applicable election period is extended
for at least 30 days after the date on
which the explanation is furnished.
Thus, section 417(a)(7)(A) allows the
annuity starting date to be a date that is
earlier than the date the QJSA
explanation is provided, thereby
allowing the retroactive payment of
benefits that are attributable to the
period before the QJSA explanation is
provided. Section 417(a)(7)(A)(ii)
provides that the Secretary may limit
the application of the provision
permitting the selection of a retroactive
annuity starting date by regulations,
except that the regulations may not limit
the period of time by which the annuity
starting date precedes the furnishing of
the written explanation other than by
providing that the retroactive annuity
starting date may not be earlier than
termination of employment.
Section 205(c)(8) of the Employee
Retirement Income Security Act of 1974,
Public Law 93–406 (88 Stat. 829)
(ERISA), provides a parallel rule to
section 417(a)(7) of the Code that
applies under Title I of ERISA, and
authorizes the Secretary of the Treasury
to issue regulations limiting the
application of the general rule. Thus,
Treasury regulations issued under
section 417(a)(7) of the Code apply as
well for purposes of section 205(c)(8) of
ERISA.
Explanation of Provisions
In accordance with section
417(a)(7)(A), these regulations provide
that the QJSA explanation may be
furnished on or after the annuity
starting date under certain
circumstances. The regulations refer to
the annuity starting date in such cases
as the ‘‘retroactive annuity starting
date’’, define how payments are made in
the case of a retroactive annuity starting
date, and set conditions for the use of
a retroactive annuity starting date.
Like the proposed regulations, the
final regulations provide that a
retroactive annuity starting date may be
used only if the plan provides for it and
the participant affirmatively elects to
use the retroactive annuity starting date.
If a participant affirmatively elects a
retroactive annuity starting date, the
participant must be put in
approximately the same situation he or
she would have been in had benefit

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payments actually commenced on the
retroactive annuity starting date.
Accordingly, in the case where a
participant affirmatively elects a
retroactive annuity starting date, the
plan benefits must be determined as of
that retroactive annuity starting date
(including the application of section 415
and, if applicable, section 417(e)(3) as of
that retroactive annuity starting date). If
the plan benefits are determined in that
manner, future periodic payments for a
participant who elects a retroactive
annuity starting date will be the same as
the periodic payments that would have
been paid to the participant had
payments actually commenced on the
retroactive annuity starting date. In
addition, the participant must receive a
make-up amount to reflect any missed
payments (with an appropriate
adjustment for interest from the date the
payments would have been made to the
date of actual payment).
Several commentators suggested that
an adjustment for interest should not be
required where the period between the
retroactive annuity starting date and the
date payments begin was less than three
or four months. It was argued that the
requirement of an interest adjustment in
such a case may create burdens for the
plan that are more significant that the
additional money that may be paid to
the participant. The Treasury
Department and the IRS continue to
believe that an appropriate adjustment
for interest is needed for make-up
payments. Thus, the final regulations
retain the rule that an appropriate
adjustment is required for make-up
payments. The extent to which an
adjustment is appropriate for a
particular make-up payment depends on
the facts and circumstances related to
that payment.
The final regulations retain the rules
from the proposed regulations that
provide that the notice, consent, and
election rules of section 417(a)(1), (2),
and (3) apply to the retroactive payment
of benefits but with several
modifications. These modifications
generally reflect the fact that the
existing timing rules relating to notice
and consent are generally determined
with reference to an annuity starting
date that is after the furnishing of the
QJSA explanation by a period of up to
90 days.1 If legislation currently
1 For example, section 417(a)(1) provides that a
participant may elect to waive the QJSA within the
‘‘applicable election period’’ which is defined by
section 417(a)(6) as the 90-day period ending on the
annuity starting date. Similarly, § 1.417(e)–1(b)(3)(i)
provides that the written consent of the plan
participant and the participant’s spouse must be
made no more than 90 days before the annuity
starting date. Also, § 1.417(e)–1(b)(3)(ii) provides

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41907

pending in Congress changing the 90day QJSA election period to 180 days is
enacted, it is anticipated that the
regulations will be modified to reflect
that change.
The final regulations also retain the
special spousal consent rule provided
for under the proposed regulations.
Under this special rule, the participant’s
spouse as of the time distributions
actually commence must consent to the
retroactive annuity starting date
election, if the survivor payments under
the retroactive annuity are less than
under a QJSA with an annuity starting
date after the date the QJSA explanation
was provided. This special rule applies
even if the form of benefit that the
participant elects as of the retroactive
annuity starting date is a QJSA. Thus,
for example, where a QJSA that begins
after the QJSA explanation is furnished
would provide $1,000 monthly to the
participant with a survivor annuity of
$500 monthly to the spouse, and a QJSA
with a retroactive annuity starting date
would provide $900 monthly to the
participant with a survivor annuity of
$450 monthly to the spouse, together
with a $20,000 make-up payment to the
participant, the participant would be
required to obtain the consent of the
current spouse in order to elect the
retroactive annuity starting date.
Spousal consent would be required in
this example because the spouse has a
statutory entitlement to a survivor
benefit of at least $500 per month under
a QJSA with a current annuity starting
date.
Various comments were received
regarding this spousal consent
requirement. For example, it was
suggested that spousal consent should
not be required in the cases of short
delay if the QJSA form is elected, or
where the survivor benefit under the
retroactive annuity starting date is at
least 95% of the survivor annuity
payable under a current QJSA, because
requiring consent in such a case would
create additional work and confusion
and result in little benefit to the spouse.
The regulations are not changed in this
regard, as the Treasury Department and
the IRS believe that spousal protection
cannot be diminished below the
statutorily prescribed QJSA without
spousal consent. However, these
regulations provide that such consent is
only necessary where the survivor
annuity is less than 50% of the amount
of the annuity payable during the life of
the participant under a currently
commencing QJSA. Thus, in the
that the QJSA explanation must generally be
provided no less than 30 days and no more than
90 days before the annuity starting date.

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Federal Register / Vol. 68, No. 136 / Wednesday, July 16, 2003 / Rules and Regulations

example provided above, if the
participant elected a QJSA with a
retroactive annuity starting date and a
662⁄3% survivor annuity, the QJSA
would provide $840 monthly to the
participant with a survivor annuity of
$560 to the participant’s spouse and a
make-up payment of $18,666. Spousal
consent is not required in such a case
because the $560 survivor annuity
exceeds the minimum permissible
under a currently commencing QJSA.
The proposed regulations impose an
additional condition on the availability
of a retroactive annuity starting date,
regarding the permissible amount of the
distribution under sections 417(e)(3) (if
applicable) and 415. To satisfy this
condition, the distribution must be
adjusted, if necessary, to satisfy the
requirements of sections 417(e)(3) (if
applicable) and 415 where the date the
distribution commences is substituted
for the annuity starting date.
Several comments raised concerns
regarding the requirement that sections
415 and 417(e)(3) be satisfied as of the
date of distribution as well as the
retroactive annuity starting date. Some
commentators suggested that testing
whether the distributions satisfy section
415 as of the date of distribution could
be particularly restrictive for
multiemployer plans. The
commentators noted, for example, that
for a participant who left covered
service under a multiemployer plan at
age 60 and retires at age 68 under a plan
with an age-62 normal retirement age,
the amount payable in the year of
benefit commencement, as calculated
for purposes of section 415, could well
be higher than 100% of that
participant’s average compensation for
his high three years and thus would
violate section 415.2
The IRS and Treasury Department
believe this second test is generally
needed to stop participants from using
the retroactive annuity starting date as
a means of receiving benefits in excess
of the section 415 limits. However, the
IRS and Treasury Department have
weighed the importance of compliance
with this requirement against the
associated burdens and have concluded
that testing for section 415 compliance
as of the date distributions commence
may not be needed in every case. Thus,
the final regulations do not apply the
requirement that satisfaction of the
benefit limitations of section 415 be
demonstrated as of the date
2 After the comments relating to multiemployer
plans were received, section 415(b)(11) was
amended by the Economic Growth and Tax Relief
Reconciliation Act of 2001, Public Law No. 107–16,
to provide that the 100% test of section 415(b)(1)(B)
no longer applies to multiemployer plans.

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distributions commence in the case of a
distribution that commences no more
than twelve months after the retroactive
annuity starting date, unless the form of
benefit (as of the retroactive annuity
starting date) is a form of benefit subject
to the valuation rules of section
417(e)(3). For example, in the case of a
life annuity distribution, compliance
with section 415 need not be
demonstrated as of the date of
distribution where that date is no more
than twelve months after the retroactive
annuity starting date. However, if the
distribution were a single sum
distribution, compliance with section
415 would need to be tested as of the
actual commencement date.
Some commentators also objected to
the rule in the proposed regulation that
required the plan to comply with the
valuation rules of section 417(e)(3) as of
the date of distribution. The IRS and
Treasury Department continue to
believe that a participant should not be
receiving a smaller lump sum through
the election of a retroactive annuity
starting date than would be available for
a current annuity starting date.
Accordingly, these regulations adopt the
rules of the proposed regulations
regarding the requirements of section
417(e)(3) with a clarification relating to
the application of section 417(e)(3).
Under this clarification, in the case of a
form of benefit that would have been
subject to section 417(e)(3) if
distributions had commenced as of the
retroactive annuity starting date, the
distribution pursuant to a retroactive
annuity starting date election must be
no less than the distribution produced
by applying the applicable interest rate
and the applicable mortality table
determined as of the date the
distribution commences to the annuity
form that corresponds to the annuity
form that was used to determine the
benefit amount as of the retroactive
annuity starting date. Thus, for example,
if a distribution paid pursuant to an
election of a retroactive annuity starting
date is a single-sum distribution that is
based on the present value of the
straight life annuity payable at normal
retirement age, then the amount of the
distribution must be no less than the
present value of the annuity payable at
normal retirement age, determined as of
the distribution date using the
applicable mortality table and
applicable interest rate that apply as of
the distribution date. Likewise, if a
distribution paid pursuant to an election
of a retroactive annuity starting date is
a single-sum distribution that is based
on the present value of the early
retirement annuity payable as of the

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retroactive annuity starting date, then
the amount of the distribution must be
no less than the present value of the
early retirement annuity payable as of
the distribution date, determined as of
the distribution date using the
applicable mortality table and
applicable interest rate that apply as of
the distribution date.
The final regulations retain the rule of
the proposed regulations that the
determination of whether the valuation
rules of section 417(e)(3) apply is based
upon the benefit form as of the
retroactive annuity starting date.
Accordingly, a distribution option that
is a non-decreasing benefit under
§ 1.417(e)–1(d)(6) does not become
subject to the valuation rules of section
417(e)(3) merely because of the make-up
payments for the period between the
retroactive annuity starting date and the
date distributions actually commence.
Similarly, the final regulations
provide that annuity payments that
otherwise satisfy the requirements for a
QJSA under section 417(b) will not fail
to be treated as a QJSA for purposes of
section 415(b)(2)(B) because a
retroactive annuity starting date is
elected and a make-up payment is
made. Further, to address concerns
raised by commentators, these
regulations provide that plan
distributions may be considered to be a
series of substantially equal periodic
payments for purposes of section
72(t)(2)(A)(iv) even though the plan
distributes a make-up payment to a
participant who has elected a retroactive
annuity starting date.
One commentator suggested that
make-up payments made pursuant to a
retroactive annuity starting date should
be considered to be part of a series of
substantially equal periodic payments
for purposes of the eligible rollover
distribution definition of section
402(c)(4)(A). However, these regulations
do not address this issue. Section
1.402(c)–2, Q&A–6 provides that an
adjustment in a payment that is part of
a series of substantially equal periodic
payments will be treated as part of the
series of substantially equal periodic
payments for purposes of section
402(c)(4)(A) where the adjustment was
due solely to reasonable administrative
error or delay. To ensure that any rule
applicable to make-up payments under
this regulation is consistent with the
rules generally applicable to
independent payments under Q&A–6,
the IRS and Treasury Department
anticipate reviewing these rules and
issuing guidance.
Two commentators suggested that
defined contribution plans should be
allowed to adopt provisions for

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Federal Register / Vol. 68, No. 136 / Wednesday, July 16, 2003 / Rules and Regulations
retroactive annuity starting dates. One
of these commentators suggests that the
proposed regulations would prohibit a
defined contribution plan from making
payments to cover amounts that were
unpaid due to an administrative
oversight. This commentator adds that
such a prohibition may cause the plan
to fail to provide required distributions
under section 401(a)(9). The IRS and
Treasury Department continue to
believe that the rules applicable to
retroactive annuity starting dates are
relevant only to defined benefit plans
because the benefit provided by a
defined contribution plan is equal to the
account balance and the concerns
addressed in these regulations are
generally not relevant in such a case.
Moreover, the problem raised by the
commentator appears to relate to an
administrative delay in making a
payment (which is an issue covered
under § 1.401(a)–20, A–10(b)(3)), rather
than the topic of these regulations. In
any event, a plan must provide all
distributions required by section
401(a)(9) and these regulations do not
affect that requirement.
One commentator noted that some
plans currently allow retroactive
annuity starting dates in reliance upon
a good faith interpretation of the statute
and existing regulations. This
commentator suggested that some of the
sponsors of these plans may not wish to
provide retroactive annuity starting
dates in light of these regulations and
requested that the IRS and Treasury
Department confirm that plan sponsors
who currently allow retroactive annuity
starting dates will not violate the anticutback rules of section 411(d)(6) if they
choose to amend these plans to restrict
the availability of retroactive annuity
starting dates in the future. The issues
raised in this comment are not
addressed in this Treasury decision. It is
anticipated that such plan amendments
will be governed by regulations to be
issued under section 411(d)(6) pursuant
to section 645 of the Economic Growth
and Tax Relief Reconciliation Act of
2001, Public Law 107–16 (115 Stat.
117).
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in
Executive Order 12866. Therefore, a
regulatory assessment is not required. It
is hereby certified that these regulations
will not have a significant economic
impact on a substantial number of small
entities. This certification is based on
the fact that the regulations require the
collection of plan participants’ written
elections requesting qualified retirement

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plan distributions, and written spousal
consent to these distributions, under
limited circumstances. It is anticipated
that most small businesses affected by
these regulations will be sponsors of
qualified retirement plans. Since these
written participant elections and written
spousal consents are required to be
collected only for certain distributions,
and since, in the case of a small plan,
there will be relatively few distributions
per year (and even fewer that are subject
to these requirements), small plans that
provide distributions for which this
collection of information is required
will only have to collect a small number
of participant elections and spousal
consents as a result of these regulations.
Accordingly, a Regulatory Flexibility
Analysis is not required. Pursuant to
section 7805(f) of the Internal Revenue
Code, the notice of proposed rulemaking
preceding these regulations was
submitted to the Small Business
Administration for comment on its
impact on small business.
Drafting Information
The principal authors of these
regulations are Robert M. Walsh and
Linda S. F. Marshall, Office of Division
Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities).
However, other personnel from the IRS
and Treasury participated in their
development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping
requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and 602
are amended as follows:

■

PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read, in part, as
follows:

■

Authority: 26 U.S.C. 7805 * * *
Section 1.417(e)–1(b)(3) also issued under
26 U.S.C. 417(a)(7)(A)(ii); * * *

Par. 2. Section 1.417(e)–1 is amended
by:
■ 1. Revising paragraphs (b)(3)(i),
(b)(3)(ii) introductory text, and
(b)(3)(ii)(C).
■ 2. Redesignating paragraphs (b)(3)(iii)
and (b)(3)(iv) as paragraphs (b)(3)(viii)
and (b)(3)(ix), respectively.
■

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41909

3. Adding new paragraphs (b)(3)(iii)
through (b)(3)(vii).
The additions and revisions read as
follows:

■

1.417(e)–1 Restrictions and valuations of
distributions from plans subject to sections
401(a)(11) and 417.

*

*
*
*
*
(b) * * *
(3) * * * (i) Written consent of the
participant and the participant’s spouse
to the distribution must be made not
more than 90 days before the annuity
starting date, and, except as otherwise
provided in paragraphs (b)(3)(iii) and
(b)(3)(iv) of this section, no later than
the annuity starting date.
(ii) A plan must provide participants
with the written explanation of the
QJSA required by section 417(a)(3) no
less than 30 days and no more than 90
days before the annuity starting date,
except as provided in paragraph
(b)(3)(iv) of this section regarding
retroactive annuity starting dates.
However, if the participant, after having
received the written explanation of the
QJSA, affirmatively elects a form of
distribution and the spouse consents to
that form of distribution (if necessary),
a plan will not fail to satisfy the
requirements of section 417(a) merely
because the written explanation was
provided to the participant less than 30
days before the annuity starting date,
provided that the following conditions
are met:
*
*
*
*
*
(C) The annuity starting date is after
the date that the explanation of the
QJSA is provided to the participant.
*
*
*
*
*
(iii) The plan may permit the annuity
starting date to be before the date that
any affirmative distribution election is
made by the participant (and before the
date that distribution is permitted to
commence under paragraph (b)(3)(ii)(D)
of this section), provided that, except as
otherwise provided in paragraph
(b)(3)(vii) of this section regarding
administrative delay, distributions
commence not more than 90 days after
the explanation of the QJSA is provided.
(iv) Retroactive annuity starting dates.
(A) Notwithstanding the requirements of
paragraphs (b)(3)(i) and (ii) of this
section, pursuant to section 417(a)(7), a
defined benefit plan is permitted to
provide benefits based on a retroactive
annuity starting date if the requirements
described in paragraph (b)(3)(v) of this
section are satisfied. A defined benefit
plan is not required to provide for
retroactive annuity starting dates. If a
plan does provide for a retroactive
annuity starting date, it may impose
conditions on the availability of a

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retroactive annuity starting date in
addition to those imposed by paragraph
(b)(3)(v) of this section, provided that
imposition of those additional
conditions does not violate any of the
rules applicable to qualified plans. For
example, a plan that includes a single
sum payment as a benefit option may
limit the election of a retroactive
annuity starting date to those
participants who do not elect the single
sum payment. A defined contribution
plan is not permitted to have a
retroactive annuity starting date.
(B) For purposes of this section, a
‘‘retroactive annuity starting date’’ is an
annuity starting date affirmatively
elected by a participant that occurs on
or before the date the written
explanation required by section
417(a)(3) is provided to the participant.
In order for a plan to treat a participant
as having elected a retroactive annuity
starting date, future periodic payments
with respect to a participant who elects
a retroactive annuity starting date must
be the same as the future periodic
payments, if any, that would have been
paid with respect to the participant had
payments actually commenced on the
retroactive annuity starting date. The
participant must receive a make-up
payment to reflect any missed payment
or payments for the period from the
retroactive annuity starting date to the
date of the actual make-up payment
(with an appropriate adjustment for
interest from the date the missed
payment or payments would have been
made to the date of the actual make-up
payment). Thus, the benefit determined
as of the retroactive annuity starting
date must satisfy the requirements of
sections 417(e)(3), if applicable, and
section 415 with the applicable interest
rate and applicable mortality table
determined as of that date. Similarly, a
participant is not permitted to elect a
retroactive annuity starting date that
precedes the date upon which the
participant could have otherwise started
receiving benefits (e.g., in the case of an
ongoing plan, the earlier of the
participant’s termination of employment
or the participant’s normal retirement
age) under the terms of the plan in effect
as of the retroactive annuity starting
date. A plan does not fail to treat a
participant as having elected a
retroactive annuity starting date as
described in this paragraph (b)(3)(iv)(B)
merely because the distributions are
adjusted to the extent necessary to
satisfy the requirements of paragraph
(b)(3)(v)(B) and (C) of this section
relating to sections 415 and 417(e)(3).
(C) If the participant’s spouse as of the
retroactive annuity starting date would
not be the participant’s spouse

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determined as if the date distributions
commence was the participant’s annuity
starting date, consent of that former
spouse is not needed to waive the QJSA
with respect to the retroactive annuity
starting date, unless otherwise provided
under a qualified domestic relations
order (as defined in section 414(p)).
(D) A distribution payable pursuant to
a retroactive annuity starting date
election is treated as excepted from the
present value requirements of paragraph
(d) of this section under paragraph (d)(6)
of this section if the distribution form
would have been described in paragraph
(d)(6) of this section had the distribution
actually commenced on the retroactive
annuity starting date. Similarly, annuity
payments that otherwise satisfy the
requirements of a QJSA under section
417(b) will not fail to be treated as a
QJSA for purposes of section
415(b)(2)(B) merely because a
retroactive annuity starting date is
elected and a make-up payment is
made. Also, for purposes of section
72(t)(2)(A)(iv), a distribution that would
otherwise be one of a series of
substantially equal periodic payments
will be treated as one of a series of
substantially equal periodic payments
notwithstanding the distribution of a
make-up payment provided for in
paragraph (b)(3)(iv)(B) of this section.
(E) The following example illustrates
the application of paragraph (b)(3)(iv)(D)
of this section:
Example. Under the terms of a defined
benefit plan, participant A is entitled to a
QJSA with a monthly payment of $1,500
beginning as of his annuity starting date. Due
to administrative error, the QJSA explanation
is provided to A after the annuity starting
date. After receiving the QJSA explanation A
elects a retroactive annuity starting date.
Pursuant to this election, A begins to receive
a monthly payment of $1,500 and also
receives a make-up payment of $10,000.
Under these circumstances the monthly
payments may be treated as a QJSA for
purposes of section 415(b)(2)(B). In addition,
the monthly payments of $1,500 and the
make-up payment of $10,000 may be treated
as part of as series of substantially equal
periodic payments for purpose of section
72(t)(2)(A)(iv).

(v) Requirements applicable to
retroactive annuity starting dates. A
distribution is permitted to have a
retroactive annuity starting date with
respect to a participant’s benefit only if
the following requirements are met:
(A) The participant’s spouse
(including an alternate payee who is
treated as the spouse under a qualified
domestic relations order (QDRO), as
defined in section 414(p)), determined
as if the date distributions commence
were the participant’s annuity starting
date, consents to the distribution in a

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manner that would satisfy the
requirements of section 417(a)(2). The
spousal consent requirement of this
paragraph (b)(3)(v)(A) is satisfied if such
spouse consents to the distribution
under paragraph (b)(2)(i) of this section.
The spousal consent requirement of this
paragraph (b)(3)(v)(A) does not apply if
the amount of such spouse’s survivor
annuity payments under the retroactive
annuity starting date election is no less
than the amount that the survivor
payments to such spouse would have
been under an optional form of benefit
that would satisfy the requirements to
be a QJSA under section 417(b) and that
has an annuity starting date after the
date that the explanation was provided.
(B) The distribution (including
appropriate interest adjustments)
provided based on the retroactive
annuity starting date would satisfy the
requirements of section 415 if the date
the distribution commences is
substituted for the annuity starting date
for all purposes, including for purposes
of determining the applicable interest
rate and the applicable mortality table.
However, in the case of a form of benefit
that would have been excepted from the
present value requirements of paragraph
(d) of this section under paragraph (d)(6)
of this section if the distribution had
actually commenced on the retroactive
annuity starting date, the requirement to
apply section 415 as of the date
distribution commences set forth in this
paragraph (b)(3)(v)(B) does not apply if
the date distribution commences is
twelve months or less from the
retroactive annuity starting date.
(C) In the case of a form of benefit that
would have been subject to section
417(e)(3) and paragraph (d) of this
section if distributions had commenced
as of the retroactive annuity starting
date, the distribution is no less than the
benefit produced by applying the
applicable interest rate and the
applicable mortality table determined as
of the date the distribution commences
to the annuity form that corresponds to
the annuity form that was used to
determine the benefit amount as of the
retroactive annuity starting date. Thus,
for example, if a distribution paid
pursuant to an election of a retroactive
annuity starting date is a single-sum
distribution that is based on the present
value of the straight life annuity payable
at normal retirement age, then the
amount of the distribution must be no
less than the present value of the
annuity payable at normal retirement
age, determined as of the distribution
date using the applicable mortality table
and applicable interest rate that apply as
of the distribution date. Likewise, if a
distribution paid pursuant to an election

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Federal Register / Vol. 68, No. 136 / Wednesday, July 16, 2003 / Rules and Regulations
of a retroactive annuity starting date is
a single-sum distribution that is based
on the present value of the early
retirement annuity payable as of the
retroactive annuity starting date, then
the amount of the distribution must be
no less than the present value of the
early retirement annuity payable as of
the distribution date, determined as of
the distribution date using the
applicable mortality table and
applicable interest rate that apply as of
the distribution date.
(vi) Timing of notice and consent
requirements in the case of retroactive
annuity starting dates. In the case of a
retroactive annuity starting date, the
date of the first actual payment of
benefits based on the retroactive annuity
starting date is substituted for the
annuity starting date for purposes of
satisfying the timing requirements for
giving consent and providing an
explanation of the QJSA provided in
paragraphs (b)(3)(i) and (ii) of this
section, except that the substitution
does not apply for purposes of
paragraph (b)(3)(iii) of this section.
Thus, the written explanation required
by section 417(a)(3)(A) must generally
be provided no less than 30 days and no
more than 90 days before the date of the
first payment of benefits and the
election to receive the distribution must
be made after the written explanation is
provided and on or before the date of
the first payment. Similarly, the written
explanation may also be provided less
than 30 days prior to the first payment
of benefits if the requirements of
paragraph (b)(3)(ii) of this section would
be satisfied if the date of the first
payment is substituted for the annuity
starting date.
(vii) Administrative delay. A plan will
not fail to satisfy the 90-day timing
requirements of paragraphs (b)(3)(iii)
and (vi) of this section merely because,
due solely to administrative delay, a
distribution commences more than 90
days after the written explanation of the
QJSA is provided to the participant.
*
*
*
*
*
PART 602—OMB CONTROL NUMBERS
UNDER THE PAPERWORK
REDUCTION ACT
Par. 3. The authority citation for part
602 continues to read as follows:

■

Authority: 26 U.S.C. 7805.
■ Par. 4. In § 602.101, paragraph (b) is
amended by adding the following entry
in numerical order to the table to read as
follows:

§ 602.101

*

OMB Control numbers.

*
*
(b) * * *

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*

*

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CFR part or section where
identified and described
*
*
*
1.417(e)–1 .........................
*
*
*

Current OMB
control No.
*

*
1545–1724
*
*

Robert E. Wenzel,
Deputy Commissioner for Services and
Enforcement.
Approved: July 9, 2003.
Pamela Olson,
Assistant Secretary of the Treasury.
[FR Doc. 03–17869 Filed 7–15–03; 8:45 am]
BILLING CODE 4830–01–P

DEPARTMENT OF THE INTERIOR
Office of Surface Mining Reclamation
and Enforcement
30 CFR Part 917
[KY–242–FOR]

Kentucky Regulatory Program
AGENCY: Office of Surface Mining
Reclamation and Enforcement (OSM),
Interior.
ACTION: Final rule; withdrawal of
required amendment.
SUMMARY: We are withdrawing a
required amendment to the Kentucky
regulatory program (the Kentucky
program) under the Surface Mining
Control and Reclamation Act of 1977
(SMCRA or the Act). The required
amendment concerns the determination
of the premining use of land that was
not previously mined. In doing so, we
find that the Kentucky program is no
less effective than the corresponding
Federal regulations.
EFFECTIVE DATE: July 16, 2003.
FOR FURTHER INFORMATION CONTACT:
Kentucky Field Office Director William
J. Kovacic. Telephone: (859) 260–8402;
Internet address: [email protected].
SUPPLEMENTARY INFORMATION:

I. Background on the Kentucky Program
II. Submission of the Required Amendment
III. OSM’s Findings
IV. Summary and Disposition of Comments
V. OSM’s Decision
VI. Procedural Determinations

I. Background on the Kentucky
Program
Section 503(a) of the Act permits a
State to assume primacy for the
regulation of surface coal mining and
reclamation operations on non-Federal
and non-Indian lands within its borders
by demonstrating that its State program
includes, among other things, ‘‘a State

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41911

law which provides for the regulation of
surface coal mining and reclamation
operations in accordance with the
requirements of the Act * * *; and
rules and regulations consistent with
regulations issued by the Secretary
pursuant to the Act.’’ See 30 U.S.C.
1253(a)(1) and (7). On the basis of these
criteria, the Secretary of the Interior
conditionally approved the Kentucky
program on May 18, 1982.
You can find background information
on the Kentucky program, including the
Secretary’s findings, the disposition of
comments, and conditions of approval
in the May 18, 1982, Federal Register
(47 FR 21426). You can also find later
actions concerning Kentucky’s program
and program amendments at 30 CFR
917.12, 917.13, 917.15, 917.16 and
917.17.
II. Submission of the Required
Amendment
On October 1, 1992, we published, in
the Federal Register (57 FR 45295), a
requirement that Kentucky amend their
program to provide that in determining
premining uses of land not previously
mined, the land must have been
properly managed. We codified the
required amendment in the Federal
regulations at 30 CFR 917.16(g).
Subsequent review of Kentucky’s
program led to our determination that
this requirement may not be necessary
to assure that Kentucky’s program is as
effective as the Federal regulations. We
announced our intent to reconsider this
required amendment in the April 29,
2003, Federal Register (68 FR 22646). In
the same document, we invited public
comment on the proposed removal of
the required amendment. The public
comment period closed on May 29,
2003. We received comments from one
Federal agency.
III. OSM’s Findings
Following are the findings we made
concerning the proposed removal of the
required amendment under SMCRA and
the Federal regulations at 30 CFR 732.15
and 732.17.
The Kentucky regulations at 405
Kentucky Administrative Regulations
(KAR) 16:210 and 405 KAR 18:220
Section 1 (1)(a) and (b) currently
provide:
Prior to the final release of performance
bond, affected areas shall be restored in a
timely manner:
(a) To conditions capable of supporting the
uses which the areas were capable of
supporting before any mining; or
(b) To conditions capable of supporting
higher or better alternative uses as approved
by the cabinet under Section 4 of this
administrative regulation.

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