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Retirement Plan Participant Rights - When Future Benefit Accruals Will Be Significantly Reduced

When future benefit accruals will be significantly reduced by a plan amendment, participants should receive a notice explaining how future accruals are expected to be reduced. The notice is generally referred to as an IRC section 204(h) Notice.

IRC Section 204(h) Notice

Description: A notice that an amendment has been made to a pension (defined benefit, money purchase and target benefit) plan that provides for a significant reduction in the rate of future benefit accruals. The notice must be given to all participants and/or beneficiaries, and each employee organization representing participants.

What It Should Contain: The notice must set forth the specific provisions of the amendment (reduction in future accruals), and its effective date. This summary will not explain how the individual benefit of each participant or alternate payee will be affected by the amendment. The notice should be written in a manner that would be understood by the average plan participant and must provide sufficient information to allow you or your beneficiary to understand the magnitude of the reduction. 

Timing: The notice should be provided at least 45 days prior to the effective date of the reduction, 30 days for an early retirement subsidy in a merger or acquisition, and 15 days for other mergers or if a small pension plan is involved.

Who Is Responsible For Sending It: The administrator of the plan.

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Page Last Reviewed or Updated: 23-Jul-2014