As we speculated a few weeks ago, the IRS has extended the deadline for plan sponsors to amend their plan documents to comply with certain law changes under PPA and WRERA. Notice 2010-77 essentially just adds a year to the previously extended deadlines from Notice 2009-97. These extensions may be a moot point for many plan sponsors since the relief has come so late in the year and many have already made good-faith amendments.
So, what retirement plan amendment deadlines have been extended and what do they mean? They are:
1. Amendments to comply with the IRC 436 benefit restriction rules. These are the benefit restrictions that are activated when a pension plan’s funded status (AFTAP) falls below certain thresholds. The deadline for adopting 436 amendments has been extended from the end of the 2010 plan year to the end of the 2011 plan year.
2. Amendments for cash balance and other applicable defined benefit plans (e.g., PEP plans) to comply with IRC 411(a)(13), other than 411(a)(13(A) and 411(b)(5). These are the amendments necessary for a hybrid plan to be considered a Statutory Hybrid Plan (SHP) under PPA. An SHP defines a benefit as an accumulated balance (or accumulated percentage of pay).
SHPs are eligible for limited relief from certain issues that originally plagued cash balance plans such as age discrimination, 417(e) minimum lump sum rules, and interest rate whipsaw. The 411(a)(13(A) and 411(b)(5) provisions encompass requirements such as 3-year vesting for SHP benefits and the rule that benefit accruals cannot be reduced or cease solely because of the attainment of any age. Similar to the 436 amendments, the deadline for adopting the 411(a)(13) amendments has been extended from the end of the 2010 plan year to the end of the 2011 plan year.
3. Extension of time when a plan is eligible for relief from 411(d)(6) (i.e., the rules prohibiting decreases in accrued benefits) when adopting amendments to comply with new laws such as PPA and WRERA. The period of relief is expected to apply as long as the amendment is adopted prior to the application date of the final regulations necessitating the amendment. Notice 2010-77 goes on to state that the IRS expects the final regulations to be effective January 1, 2012, so this implies the relief period would end on that date.
A final important item from the Notice: If a plan is submitted to the IRS for a determination letter prior to the extended amendment deadline, then the submitted plan document must still incorporate any changes in qualification requirements and guidance published through that date. For example, if a cash balance plan document is submitted for determination on January 1, 2011 then it must still include provisions incorporating the 436 and hybrid plan regulations even though the actual amendment deadline for an ongoing plan isn’t until the end of the year. This effectively accelerates the amendment deadline for plans submitted for IRS approval in 2011.
