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Guest Article

Deloitte logo

(From the March 17, 2008 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

House Passes PPA Technical Corrections Bill


The U.S. House of Representatives late on March 12, 2008 passed a bill (H.R. 3361) to make a series of "technical" corrections to the Pension Protection Act ("PPA") of 2006 (P.L. 109-280). The House-passed bill differs slightly from a PPA technical corrections bill (S. 1974) the Senate approved in December 2007. That means the House and Senate bills will need to be reconciled, a process expected to begin in April.

Both H.R. 3361 and S. 1974 address a wide range of technical issues with the PPA, including some that are more substantive than technical. For example, the bills would --

  • Create a special rule permitting certain underfunded pension plans to continue paying involuntary cashouts even if they are subject to the IRC § 436 restrictions on paying lump sums and other "prohibited payments;"
  • Update the required mortality table for adjusting benefits and limits pursuant to the IRC § 415(b) limit to conform to the mortality table plans must use for funding purposes; and
  • Confirm the combined plan deduction limit does not apply if employer contributions to the defined contribution plan are less than six percent of compensation. (The IRS initially took the position the combined plan limit applies to the defined benefit plan contributions even if contributions to the defined contribution plan are less than six percent of compensation, but later reversed itself in anticipation of this technical correction being enacted.)

As noted, however, there are differences between the two bills. For example, S. 1974 reportedly includes a provision that would allow plans to take expected investment returns into account for purposes of "smoothing" plan asset values. There is no comparable provision in H.R. 3361, although Representative Earl Pomeroy (D-ND) -- a member of the House Ways and Means Committee -- is continuing to push for legislation to permit "smoothing" of plan asset values. The IRS's proposed regulations on valuing plan assets only permit asset values to be averaged over as many as two years, which appears to be consistent with the statutory language currently in effect.

Unfortunately, this and other differences between H.R. 3361 and S. 1974 will not be resolved until after Congress returns from its spring recess on March 31. Reports indicate the Senate is planning to take up the House-passed version of H.R. 3361 soon after returning to work. If they pass that bill without amendment it can go directly to the President's desk for his signature. That is the good news. The bad news is that the House-passed bill does not address the smoothing issue, so that would need to be dealt with in separate legislation. Updates on the progress of this important legislation will be published in future editions of Washington Bulletin.


Deloitte logoThe information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations.

If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Erinn Madden 202.572.7677, Bart Massey 202.220.2104, Mark Neilio 202.378.5046, Martha Priddy Patterson 202.879.5634, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Tom Veal 312.946.2595, Deborah Walker 202.879.4955.

Copyright 2008, Deloitte.


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