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Recently, the IRS issued final regulations that provide prospective relief from the anti-cutback rules imposed by Section 411(d)(6) of the Code for plan sponsors amending qualified plans to remove in-service distributions for active employees who attain age 70½. As you are probably aware, prior to the Small Business Job Protection Act of 1996 or SBJPA, Section 401(a)(9) of the Code required that minimum distributions were generally required to begin by April 1 of the calendar year following the calendar year in which the employee attained age 70½. The SBJPA changed the required beginning date for employees, other than 5% owners, to the later of (a) April 1 of the calendar year following the calendar year in which an employee attains age 70½ and (b) April 1 of the calendar year following the calendar year in which the employee retires. However, Section 411(d)(6) of the Code imposes "anti-cutback" provisions, which generally provide that a plan may not retroactively remove an optional form of benefit, such as the post age 70½ distribution option for active employees. Therefore, absent relief, a plan provision providing in-service distributions after age 70½ could not be removed without running afoul of the anti-cutback provision of Section 411(d)(6) of the Code.

Under the recently issued final regulations, a plan may be amended to eliminate in-service post age 70½ distributions. If a plan already permits employees to take distributions from the plan in any amount, at age 59½ or later, then the plan may be amended to eliminate in-service post age 70½ required distributions simply by removing the required minimum distribution language. If, however, a plan does not permit employees to take distributions in any amount, at age 59½ or later, then an amendment to eliminate in-service post age 70½ distributions may be adopted provided that the amendment (a) applies only to employees who attain age 70½ in or after a calendar year that begins after the later of (i) December 31, 1998 and (ii) the adoption date of the amendment; (b) provides that, for employees who retire after age 70½, the plan preserves all optional forms of benefits that would have been available had they retired at age 70½; and (c) is adopted no later than the last day of the remedial amendment period for changes made by the SBJPA (December 31, 1999 for most private sector calendar year plans).

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