DEPARTMENT OF THE TREASURY 201422029 INTERNAL REVENUE SERVICE

WASHINGTON. D.C. 20224

TAX EXEMPT AND

GOVERNMENT ENTITIES

DIVISION

MAR 06 2014 Uniform Issue List: 401.06-01 Legend Company = Plan = Dear, This is in response to your letter dated October 9,2012, in which your authorized representative, on your behalf, requested a Private Letter Ruling that the minimum distribution requirements of section 401 (a)(9) of the Internal Revenue Code ("Code") would not be violated if the Company amended the Plan to offer a lump sum payment option, during a limited window period, to the Plan's participants and beneficiaries for whom annuity payments have already begun. The Company sells and manufactures goods both in the United States and throughout the world. The Company is the sponsor of the Plan which is intended to be a tax qualified defined benefit plan having received a favorable determination letter from the Internal Revenue Service, most recently dated ****. The Plan covers a significant number of employees and former employees of the Company and beneficiaries. The normal form of benefit for a single participant in the Plan is a single life annuity and the normal form of benefit for a married participant is a 50% joint and survivor annuity. Optional forms of benefits in the Plan include a 50%, a 75% and a 100% joint and survivor annuity, a 10 year certain and life annuity and a lump sum option for non-collectively bargained participants.

2 201422029 The Company represents that due to the recent volatility of the investment market and interest rates, pension benefit obligations have fluctuated such that the Company has sought a more level funding approach for retirement benefits. The Company represents that the volatility of interest rates and changes in funding requirements and accounting rules have increased the cost of financing, made financial management (including contributions to the Plan) more difficult and made the Company less competitive in the marketplace. In order to reduce the impact of the volatility of the pension obligations and because the plan currently allows a lump sum payment option at or after termination for non-collectively bargained participants, the Company proposes to amend the plan to offer a lump sum payment option during a limited period of time between thirty (30) and sixty (60) days (the "Window Program"). The option will be offered to the following groups 1 of participants and beneficiaries (collectively referred to as the "Covered Individuals"): 1. Participants currently receiving benefits; 2. Participants who have retired but have not begun receiving benefit payments; 3. Terminated deferred vested participants; 4. Beneficiaries who presently are receiving either pre-retirement or post retirement survivor benefits or are eligible to receive such benefits under the plan; and 5. Alternative payees if eligible under Qualified Domestic Relations Order. The value of the benefit available to Covered Individuals will be the actuarial present value of their remaining benefits under the Plan, calculated at the time of their election in the form of a single lump sum payment. Covered Individuals will be offered the option to receive the current actuarial present value of their accrued benefits in the normal form of benefits, as a qualified optional survivor annuity or an immediate lump sum payment. The option to change the form of benefit payment shall be offered to all Covered Individuals. If currently in pay status, the option to change the form of benefit distribution shall be in exchange for and not in addition to the current form of benefit payment applicable to the Covered Individuals. Elections by Covered Individuals to receive a new distribution option will be subject to applicable spousal consent. Such consent must include, if applicable, both a Covered Individual'S current spouse and a former spouse if the Covered Individual has remarried since the annuity starting date. 1 A certain subset of these groups, in objectively determined and nondiscriminatory categories, with respect to which annuity settlements are deemed impractical, may be excluded.

201422029 3 The Company represents that the funding levels of the Plans are sufficient so that the Window Program will not trigger benefit restrictions described in section 436 of the Code. In addition, the Company represents that the amendment will not change the ability of Covered Individuals to elect during the window period to receive qualified joint and survivor annuities or qualified optional survivor annuities in accordance with sections 401 (a)(11) and 417 of the Code. Based on the facts and representations stated above, Company requests a ruling that the minimum distribution requirements of section 401 (a)(9) of the Code would not be violated if Company amends the Plan to offer the lump sum option to participants and beneficiaries for whom annuity payments have commenced under the Plan. APPLICABLE LAW Section 401 (a)(9) of the Code and the regulations thereunder ("Regulations") provide rules relating to required minimum distributions from qualified plans. Section401 (a)(9) of the Code was enacted to ensure that the amounts contributed to qualified retirement plans were used for retirementby requiring that retirement payments begin no later than a certain date, with no less than a certain amount being distributed each year of retirement. The legislative history of the original version of section 401 (a)(9) of the Code in 1962 stated that its purpose is in "preventing lifetime accumulations which might escape income taxation altogether."108 Congo Rec. 18755, 18756 (1962) (statement of Sen. Smathers). In general, section 401 (a)(9)(A) of the Code states that a trust shall not constitute a qualified trust under this subsection unless the plan provides that the entire interest of each employee (i) will be distributed to such employee not later than the

required beginning date, or .

(ii) will be distributed, beginning not later than the required beginning date, in accordance with regulations over the life of such employee or over the lives of such employee and a designated beneficiary (or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated beneficiary). Section 401 (a)(11) of the Code generally provides that a defined benefit plan will not be considered a qualified plan unless vested benefits, with respect to a married participant who dies before the annuity starting date, are payable in the form of a qualified preretirement survivor annuity and, with respect to a married participant who dies after the annuity starting date, a qualified joint and survivor

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annuity. Section 415(a)(1 )(A) of the Code provides that a trust which is a part of a pension plan will not constitute a qualified trust if the pension plan provides for the payment of benefits which exceed the limitation of section 415(b). Section 415(b )(2)(8) of the Code generally provides that if the benefit under a defined benefit plan is payable in any form other than a straight life annuity, the determination as to whether the section 415(b) limit has been satisfied shall be made by adjusting the benefit so that it is equivalent to a straight life annuity. Section 417(a) of the Code provides that a plan meets the requirements of section 401 (a)(11) if, among other requirements, each participant may elect during the applicable election period to waive the qualified joint and survivor annuity form of benefit or the qualified preretirement survivor annuity form of benefit (or both).Section 417(a)(6) of the Code defines the applicable election period as meaning, in part, in the case of an election to waive the qualified joint and survivor annuity form of benefit, the 180-day period ending on the annuity starting date. Treas. Reg. § 1.401 (a)(9)-6, Q&A-1 (a), in pertinent part, states that in order to satisfy section 401 (a)(9) of the Code, distributions of the employee's entire interest under a defined benefit pension plan must be paid in the form of periodic annuity payments for the employee's life (or the joint lives of the employee and beneficiary) or over a period certain that does not exceed the maximum length of the period certain determined in accordance with A-3 of this section. Once payments have commenced over a period, the period may only be changed in accordance with A-13 or A-14 of this section. Except as otherwise provided in this section (such as permitted increases described in A-14 of this section), all payments (whether paid over an employee's life, joint lives, or a period certain) also must be nonincreasing. Treas. Reg. § 1.401 (a)(9)-6, Q&A-13(a) states that an annuity payment period may be changed in accordance with the provisions set forth in paragraph (b) of this A-13 or in association with an annuity payment increase described in A-14 of this section. Treas. Reg. § 1.401 (a)(9)-6, Q&A-14(a) states that except as otherwise provided in this section, all annuity payments (whether paid over an employee's life, joint lives, or a period certain) must be non-increasing or increase only in accordance with one or more of the following 1) With an annual percentage increase that does not exceed the percentage increase in an eligible cost-of-living index as defined in paragraph (b) of this A-14 for a 12-month period ending in the year during which the increase occurs or the prior year;

5 201422029 (2) With a percentage increase that occurs at specified times (e.g., at specified ages) and does not exceed the cumulative total of annual percentage increases in an eligible cost-of-living index as defined in paragraph (b) of this A-14 since the annuity starting date, or if later, the date of the most recent percentage increase. However, in cases providing such a cumulative increase, an actuarial increase may not be provided to reflect the fact that increases were not provided in the interim years; (3) To the extent of a reduction in the amount of the employee's payments to provide for a survivor benefit, but only if there is no longer a survivor benefit because the beneficiary whose life was being used to determine the period described in section 401 (a)(9)(A)(ii) over which payments were being made dies or is no longer the employee's beneficiary pursuant to a qualified domestic relations order within the meaning of section 414(p); (4) To pay increased benefits that result from a plan amendment; (5) To allow a benefiCiary to convert the survivor portion of a joint and survivor annuity into a single sum distribution upon the employee's death; or (6) To the extent increases are permitted in accordance with paragraph (c) or (d) ofthis A-14. Treas. Reg. § 1.415(b)-(1)(b)(1)(iii) provides that if a participant will have' distributions commencing at more than one annuity starting date, the limitations of section 415 of the Code must be satisfied as of each of the ann uity starting dates, taking into account the benefits that have been provided at all of the annuity starting dates. ANALYSIS Section 401 (a) of the Code provides a tax deferral for retirement benefits accumulated in· a qualified pension plan. Section 401 (a)(9) of the Code and the Regulations ensure that these tax-deferred accumulations are, in fact, used during retirement and do not escape taxation. Treas. Reg. § 1.401 (a)(9)-6 sets forth the rules governing required distributions from defined benefit plans and annuity contracts. Treas. Reg. § 1.401 (a)(9)-6, Q&A-13(a) states that an annuity payment period may be changed in association with an annuity payment increase described in A-14 of this section. Treas. Reg. § 1.401 (a)(9)-6, Q&A-14(a)(4) provides that annuity payments from a qualified plan may increase if the payment of increased benefits results from a plan amendment.

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The Company's proposed amendment provides a lump sum option which provides Covered Individuals 2 the option to elect, within a Window Program of no less than 30 days but no longer than 60 days, to receive the current actuarial present value of their accrued benefit in the form of a qualified joint and survivor annuity, a qualified optional survivor annuity or a lump sum payment. Elections by Covered Individuals to receive a new distribution option will be subject to applicable required spousal consent. The proposed amendment will result in a change in the annuity payment period. The annuity payment period will be changed in association with the payment of increased benefits as a result of the addition of the lump sum option. In addition, Covered Individuals who wish to change their current distribution option will be considered to have a new annuity starting date as of the first date of the month in which their new benefit is payable. Because the ability to select a lump sum will only be available during a limited window, the increased benefit payments will result from the proposed plan amendment and, as such, are a permitted benefit increase under Treas. Reg. § 1.401 (a)(9)-6, Q&A-14(a)(4). In order for a plan to remain qualified under section 401 (a) of the Code, the calculation of the value of the benefit elected under the lump sum window option must comply with the requirements of section 417(e) and the regulations thereunder. Under section 6.03 of Revenue Procedure 2014-4, subject to certain exceptions, the IRS generally does not issue letter rulings on matters involving qualification issues under section 401 through 420 of the Code. Qualification matters are generally handled by the Employee Plans Determination letter program as provided in Revenue Procedure 2014-6. Accordingly, we have not considered, among other matters, whether the lump sum window benefits comply with the requirements of section 417(e) and the regulations thereunder with respect to the amount of the distribution and minimum present value requirement that is applied based on the present value of the normal retirement benefit. Instead, this letter ruling is based on your representations that the lump sum window option satisfies section 417(e) of the Code and section 1.417(e)-1 of the regulations. RULING Therefore, in this circumstance, the minimum distribution requirements of section 401 (a)(9) of the Code will not be violated if the Company amends the Plan to offer a lump sum payment option, during a limited window period of no less than 30 days and no more than 60 days to Covered Individuals for whom annuity payments have already begun. 2 The Company's ruling request is limited to Covered Individuals for whom annuity payments have already begun.

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Except as specifically ruled above, no opinion is expressed as to the federal tax consequences of the transaction described above under any other provisions of the Code, including sections 401 (a)(4), 411,415,417 and 436 or Title I of ERISA No opinion is expressed regarding the qualification of Plan. In addition, no opinion is expressed on whether the method for valuing benefits under the lump sum window option satisfies the requirements of section 417(e) and the regulations thereunder. . This letter is directed only to the taxpayer who requested it. Section 611 0(k)(3) of the Code provides that it may not be used or cited as precedent. If you wish to inquire about this ruling please contact ******.Please address all correspondence to SE:T:EP:RA:T2. Sincerely, ,fl' t) ~r::;- William B. Hulteng, Manager Employee Plans Technical Enclosures; Deleted copy of letter ruling Notice of Intention to Disclose cc: