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Notice Requirements for Benefit Restrictions in Single-Employer Defined Benefit Plans

Notice 2012-46  (July 23, 2012):

  • Explains when and how single-employer defined benefit plans must notify participants and beneficiaries of benefit restrictions (Internal Revenue Code Section 436 and ERISA Section 206(g))

  • Contains a sample notice for plans to comply with ERISA Section 101(j)

Benefit restrictions

  • Single-employer DB plans less than 60% funded must:
    • restrict benefits, if any, for unpredictable contingent events (for example, a plant shutdown or similar event that isn't based on age, performance of services, receipt of compensation, death or disability), and
    • suspend benefit accruals.

  • Plans less than 80% funded must restrict lump-sum distributions.

  • Plans less than 80% funded or where the sponsor is in bankruptcy can’t make prohibited payments. For example, payments:
    • that exceed the monthly single-life annuity payment, and
    • to insurers for irrevocable commitments to pay benefits.


The plan must restrict benefits on the first date that the plan’s adjusted funding target attainment percentage (AFTAP) is actually or presumed to be less than the applicable 60% or 80%. A plan’s AFTAP is its funded target attainment percentage plus any employee annuities for the previous two plan years.

Plan administrators must notify participants and beneficiaries who are, or are likely to be, affected by the restrictions, in writing within 30 days after the date the restrictions take effect. Otherwise, the plan may be penalized up to $1,000 each day it fails to provide the notice.

Effective date

Although the notice took effect on October 22, 2012, plan administrators could have relied on the notice or any reasonable interpretation of ERISA Section 101(j) before then.

Page Last Reviewed or Updated: 20-Aug-2014