3876 / What is the anti-cutback rule and to which benefits does it apply?
ERISA and the Code contain provisions that protect participants and beneficiaries. The anti-cutback rule prohibits a plan amendment that decreases, directly or indirectly, the accrued benefit of a participant.1 An exception may be available in certain cases of substantial business hardship described below.
Except as otherwise provided below, a plan amendment that has the effect of eliminating or reducing an early retirement benefit or a retirement-type subsidy, or eliminating certain optional forms of benefit attributable to service before the amendment is treated as impermissibly reducing accrued benefits.2 Regulations include a list of benefits that are not protected in Treasury Regulation Section 1.411(a)-4, A-1(d).
The anti-cutback rule does not prohibit any plan amendment that reduces or eliminates benefits or subsidies that create significant burdens or complexities for the plan and plan participants unless the amendment adversely affects the rights of any participant in a more than de minimis manner.3 If a series of plan amendments made at different times have the effect, when taken together, of reducing or eliminating a protected benefit in a more than de minimis manner, the amendment will violate IRC Section 411(d)(6).4