Amortization extensions - IRC 412(e), 412(f)

[Effen]

Has anyone had any experience with an amortization extension under IRC 412(e)?

How willing is the IRS for grant extensions? What happens if/when the plan becomes adaquately funded? What happens if the plan increases benefits during the extension period?

[Guest gnsesq]

This is a hot topic right now -- IRS iappears to be sitting on many 412(e) applications -- Because many plans are facing funding deficiencies and because of the fear of plan failures, the IRS is taking their time to respond to 412(e) applications -- It is a popular held belief that the IRS was hesitant to make policy in this regard until after the elections -- We hope we will start to see some applications approved in the next month -- My understanding is that you cannot implement benefit improvements after application accepted until you correct your funding problems

[MGB]

I doubt that many, if any, will be approved. The same people (Holland) do these reviews as funding waivers. The application must prove without a doubt that whatever the problem is, it is only temporary and stretching things out will allow them to get back on course. Not many plans that are facing difficulties now can make that claim.

Given that the PBGC multiemployer program is now in the red, the IRS isn't going to do anything that could result in further erosion of that situation. Beyond that political twist, I don't think elections had anything to do with it. Holland sat on these requests for the past few years, long before they updated the Rev. Proc. I suspect he will continue to sit on them.

If you increase benefits during the extension period, it nullifies the extension and you recreate an FSA with normal amortizations.

[Effen]

Thank you for the responses. They are both very helpfull.

If you increase benefits during the extension period, it nullifies the extension and you recreate an FSA with normal amortizations.

Do you think this means retroactively? In other words, do you need to go back an recaclulate everything like they never granted the extension or do you just use normal amortizations going forward?