PPA Lump Sum Restrictions

[Guest PAUL DUGAN]

I have seen a number of post regarding the effect of PPA interest and mortality on lump sums but I can find nothing on the restrictions of lump sums in underfunded plans. I would think 204(h) notice is required. One of my concerns is that it may be temporary and end once the 1/1/2008 valuation is completed. Has any one seen any thing from the IRS on this or have a sample.

[Everett Moreland]

November, 2007 News Flash, Employee Plan News:

"Plan sponsors have asked the IRS whether a section 204(h) notice must be provided for certain PPA amendments in 2007. In addition to other guidance, the proposed regulations will provide the following —

"• Benefit restrictions under §436. The notice required under §101(j) of ERISA for amendments restricting benefits in accordance with IRC §436 will satisfy both the timing and content requirements for a section 204(h) notice."

[david rigby]

Revenue Ruling 2007-67: http://www.irs.gov/pub/irs-tege/rr2007-67.end.pdf

[Effen]

It may not be a 204(h) Notice, but there is notice requirement.

Act Sec. 101.

(j) NOTICE OF FUNDING-BASED LIMITATION ON CERTAIN FORMS OF DISTRIBUTION. --

--The plan administrator of a single-employer plan shall provide a written notice to plan participants and beneficiaries within 30 days --

(1)

after the plan has become subject to a restriction described in paragraph (1) or (3) of section 206(g)),

(2)

in the case of a plan to which section 206(g)(4) applies, after the valuation date for the plan year described in section 206(g)(4)(B) for which the plan's adjusted funding target attainment percentage for the plan year is less than 60 percent (or, if earlier, the date such percentage is deemed to be less than 60 percent under section 206(g)(7)), and

(3)

at such other time as may be determined by the Secretary of the Treasury.

The notice required to be provided under this subsection shall be in writing, except that such notice may be in electronic or other form to the extent that such form is reasonably accessible to the recipient.