Par. 2. Section 1.411(c)-1 is amended by: 1. Revising paragraphs (c)(1), (c)(2), and (c)(3), and by adding paragraphs (c)(5) and (c)(6). 2. Revising paragraph (d). 3. Adding paragraph (g).
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(c) Accrued benefit derived from mandatory employee contributions to a defined benefit plan--(1) General Rule. In the case of a defined benefit plan (as defined in section 414(j)), the accrued benefit derived from contributions made by an employee under the plan as of any applicable date in the form of an annual benefit commencing at normal retirement age and nondecreasing for the life of the participant is equal to the amount of the employee's accumulated contributions (determined under paragraph (c)(3) of this section) divided by the appropriate conversion factor with respect to that form of benefit (determined under paragraph (c)(2) of this section). Paragraph (e) of this section provides rules for actuarial adjustments where the benefit is to be determined in a form other than the form described in this paragraph (c)(1).
(2) Appropriate conversion factor. For purposes of this paragraph, with respect to a form of annual benefit commencing at normal retirement age described in paragraph (c)(1), the term appropriate conversion factor means the present value of an annuity in the form of that annual benefit commencing at normal retirement age at a rate of $1 per year, computed using an interest rate and mortality table which would be used under the plan under section 417(e)(3) and Sec. 1.417(e)- 1T (as of the determination date).
(3) Accumulated contributions. For purposes of section 411(c) and this section, the term accumulated contributions means the total of--
(i) All mandatory contributions made by the employee (determined under paragraph (c)(4) of this section);
(ii) Interest (if any) on such contributions, computed at the rate provided by the plan to the end of the last plan year to which section 411(a)(2) does not apply (by reason of the applicable effective dates);
(iii) Interest on the sum of the amounts determined under paragraphs (c)(3)(i) and (ii) of this section compounded annually at the rate of 5 percent per annum from the beginning of the first plan year to which section 411(a)(2) applies (by reason of the applicable effective date) to the beginning of the first plan year beginning after December 31, 1987;
(iv) Interest on the sum of the amounts determined under paragraphs (c)(3)(i) through (iii) of this section compounded annually at 120 percent of the Federal mid-term rate(s) (as in effect under section 1274(d) of the Internal Revenue Code for the first month of a plan year) for the period beginning with the first plan year beginning after December 31, 1987 and ending on the determination date; and
(v) Interest on the sum of the amounts determined under paragraphs (c)(3)(i) through (iv) of this section compounded annually, using an interest rate which would be used under the plan under section 417(e)(3) and Sec. 1.417(e)-1T (as of the determination date), from the determination date to the date on which the employee would attain normal retirement age.
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(5) Determination date--(i) For purposes of section 411(c) and this section, in a case in which a participant will receive his or her entire accrued benefit derived from employee contributions in any one of the forms described in paragraph (c)(5)(ii), the term determination date means the date on which distribution of such benefit commences. Alternatively, in such a case, the plan may provide that the determination date is the annuity starting date with respect to that benefit, as defined in Sec. 1.401(a)-20, Q&A-10.
(ii) Paragraph (c)(5)(i) applies to the following forms: an annuity that is substantially nonincreasing (e.g., an annuity that is nonincreasing except for automatic increases to reflect increases in the consumer price index), substantially nonincreasing installment payments for a fixed number of years, or a single sum distribution.
(iii) In a case in which a participant will receive a distribution that is not described in paragraph (c)(5)(i), the determination date will be as provided by the Commissioner.
(6) Examples.
(i) Facts. (A) In the following examples, Employer X maintains a qualified defined benefit plan that required mandatory employee contributions for 1987 and prior years, but not for years after