Deadline for Retirement Plan Amendments to Conform to Recent Laws Extended

The IRS has extended by one year the deadline for retirement plans to make amendments required by the Pension Protection Act (PPA) and last year’s Worker, Retiree, and Employer Recovery Act (WRERA) (Notice 2009-97). The deadline is extended to the last day of the first plan year that begins on or after Jan. 1, 2010. The previous deadline had been the last day of the first plan year that began on or after Jan. 1, 2009. The IRS granted the extension to give plan sponsors time to comply with recently released final regulations, as well as regulations the IRS anticipates releasing soon.

The extension applies to three types of plan amendment deadlines:

(1)   The deadline for amendments to single-employer defined benefit plans to meet the requirements for funding-based limits on benefits under IRC § 401(a)(29) and benefit accruals under section 436.

(2)   The deadline for amending cash balance and other applicable defined benefit plans to meet the requirements of section 411(a)(13) relating to vesting and other special rules applicable to these plans; and

(3)   The deadline for amending applicable defined contribution plans to meet the requirements of section 401(a)(35), relating to diversification requirements for certain defined contribution plans.

Amendments made to single-employer defined benefit plans to meet the requirements under IRC §§ 401(a)(29) and 436 that are made by the extended deadline will not be subject to the anti-cutback provisions of section 411(d)(6) (despite the Jan. 1, 2009, deadline contained in PPA § 1107). However, the notice does not grant relief from the anti-cutback provisions for amendments adopted after the last day of the first plan year that begins after Jan. 1, 2009 (or 2011 in the case of a section 414(d) governmental plan), if the amendments do not relate to IRC §§ 401(a)(29) and 436 or section 411(b)(5).

Sections 436, 411(a)(13), and 401(a)(35) were all added to the Internal Revenue Code by the PPA. Section 436 imposes funding-based limits on benefits and benefit accruals under single-employer plans. Section 401(a)(29) (amended by the PPA) requires single-employer defined benefit plans that are subject to the minimum funding requirements of IRC § 412 to meet the requirements of section 436.

Section 411(a)(13) contains special rules for cash balance and other applicable defined benefit plans. Section 401(a)(35) requires certain defined contribution plans to meet certain diversification requirements with respect to investments in employer securities.