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Guest Article

Deloitte logo

(From the January 28, 2008 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

IRS to Postpone Effective Date of PPA Funding Regulations Until 2009 But Will Permit Interim Reliance


In a news release, IRS indicated that the proposed effective date of PPA regulations issued in 2007 on Mortality Tables for Determining Present Value and on Benefit Restrictions for Underfunded Pension Plans will be postponed until plan years beginning on or after January 1, 2009. However, consistent with other PPA guidance, plan sponsors will be permitted to rely on the proposed regulations for 2008. IRS News Release IR-2007-212 (December 28, 2007).

PPA Funding Guidance to Have Consistent Effective Dates

In December 2007, IRS issued regulations on Hybrid Retirement Plans and Measurement of Assets and Liabilities for Pension Funding Purposes. The regulations are proposed to be effective for plan years beginning on or after January 1, 2009, but plans are permitted to rely on the regulations during the interim period between the PPA statutory effective date and the effective date of the regulation.

In contrast, the regulations previously issued by IRS on Mortality Tables for Determining Present Value (May 2007) and on Benefit Restrictions for Underfunded Pension Plans (August 2007) were proposed to be effective for plan years beginning on or after January 1, 2008.

In a news release issued the same day as the December 2007 regulations, IRS advised that:

"The Treasury Department and the Internal Revenue Service intend to issue guidance in the near future indicating that the proposed effective date for these regulations should also apply for the proposed regulations relating to employerspecific mortality tables issued in May and the proposed regulations relating to funding balances and funding-based benefit limitations under sections 430(f) and 436 issued in August. Although final regulations will not apply to plan years beginning before January 1, 2009, plan sponsors may also rely on those regulations for purposes of satisfying the statutory requirements for plan years beginning in 2008." IRS News Release IR-2007-212 (December 28, 2007).

Impact of Delayed Effective Date

Although the technical effective date of the regulations will be postponed to 2009, interim reliance on the proposed regulations is permitted. Certainly, following the proposed regulations is advisable. But do plan sponsors have to follow the proposed regulations for 2008 plan years? That is not clear.

On January 18, 2007, Rep. Earl Pomeroy (D-ND) sent a letter to Treasury Secretary Henry M. Paulson requesting confirmation that plan sponsors may rely on a "reasonable interpretation" of the new PPA requirements prior to the 2009 effective date, and seeking clarification of particular compliance options available to plan sponsors during the 2008 plan year.


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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