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Guest Article
(From the August 2, 2010 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)
While certain technical amendments are being discussed in the Senate regarding the pension funding relief that was enacted last month as part of the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act ("Act"), the Internal Revenue Service issued Notice 2010-55 to provide initial guidance on the election of alternative amortization schedules as currently prescribed.
The Act allows single employer defined benefit plans to elect for certain years to amortize the plan's shortfall amortization base under one of two alternative amortization schedules: the "2 plus 7 year" or "15-year" amortization schedule. New IRS Notice 2010-55 reiterates the statutory conditions under which the election can be made. Among other bright-line requirements, the Notice underscores that an election can be made with respect to a plan year only if the due date for the minimum required contribution occurs after June 25, 2010, the date the Act was enacted. A sponsor may not elect an alternative amortization schedule for a plan year beginning on October 1, 2008 and ending September 30, 2009, for example, because the due date for contributions for that year was June 15, 2010. Further, an electing sponsor is required to give notice of such an election to participants, beneficiaries and the PBGC.
The Notice does not answer many of the key questions relating to the relief, including how to make an election to take advantage of the alternative shortfall amortization schedules. But it does respond to one question that apparently has come up regarding whether filing a Form 5500 for a plan year will preclude the plan sponsor from electing relief for that year. Notice 2010-55 clarifies that for plan years ending before the guidance is issued, the sponsor will be permitted to elect an alternative amortization schedule regardless of whether the Form 5500 (and Schedule SB) has been filed for the year. Notice 2010-55 instructs plan sponsors to file the Form 5500 (and Schedule SB) in accordance with the applicable deadlines, and states that future guidance will address the reporting requirements for electing plan sponsors whose Form 5500 (and Schedule SB) has already been filed.
In addition to the procedures for making an election, the Notice indicates future guidance will address:
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The IRS also released Notice 2010-56, which addresses the special funding rules applicable to multiemployer defined benefit plans under the Act.
The 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, Bart Massey 202.220.2104, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Deborah Walker 202.879.4955. Copyright 2010, Deloitte. |
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