IRS Notice 2009-97 Plan Amendment Deadline Extension

[Guest DBPension]

Does the IRS Notice 2009-97 one year extension of the deadline for Plan Amendment implementation of 2006 PPA changes apply to use of the (graded-in) 3 segment Corporate Bond rates in lieu of the 30-year Treasury Bond Rate for Lump Sum calculations? A cursory reading suggests that the Extension does NOT apply to this change in Lump Sum Interest rates implying that a Plan Amendment must still be in place by 12/31/09 (for calendar year plans) for the change to be valid.

Is that correct ?

[Guest DBPension]

Though I'd add a link to the Reference IRS Notice ... http://www.irs.gov/pub/irs-drop/n-09-97.pdf

Can anyone help please ?

[Guest L337pwner5]

I agree with your initial assessment. The notice does not provide an extension for the PPA changes to Code section 417(e)(3).

[Guest DBPension]

I agree with your initial assessment. The notice does not provide an extension for the PPA changes to Code section 417(e)(3).

Thank you ...one follow-up. If this (calendar year) plan does not actually have in place an approved Amendment by 12/31/09, can they approve such an Amendment in early 2010 BACKDATING to a date prior to 12/31/09. My reading would be ......... NO (the "effective" date being irrelevant in this case) ............. the amendmant must be "approved" by 12/31/09 or its too late, which appears to mean that any lump sum payouts prior to the (2010) amendment approval date that used the 3 segment Corporate Bond interest rates would need to be recalculated using the (pre 2006 PPA) 30 year Treasury rate.

Is my understanding correct ?

[Guest L337pwner5]

I think your reading is correct, except that lump sum payouts should be calculated using the segment rates starting on 1/1/2008 (or using the greater-of transition rule approved in Notice 2007-67 (or was it 2008-30?)). If you don't adopt the amendment by 12/31/2009, you would need to go through VCP for a nonamender failure. But to take advantage of the PPA retroactive amendment provision (PPA 1107, I think), the amendment needs to be adopted by 12/31/2009. It should be effective 1/1/2008 (or an amendment implementing the transition rule should be effective 1/1/2008).

At least, that's my two cents.

[Guest DBPension]

I think your reading is correct, except that lump sum payouts should be calculated using the segment rates starting on 1/1/2008 (or using the greater-of transition rule approved in Notice 2007-67 (or was it 2008-30?)). If you don't adopt the amendment by 12/31/2009, you would need to go through VCP for a nonamender failure. But to take advantage of the PPA retroactive amendment provision (PPA 1107, I think), the amendment needs to be adopted by 12/31/2009. It should be effective 1/1/2008 (or an amendment implementing the transition rule should be effective 1/1/2008).

At least, that's my two cents.

Thanks ... (and assuming its too late to get that amendment in place AND ADOPTED by 12/31/09) .......... can I do anything OTHER THAN than recalculate a midyear 2009 Lump sum payout that had used the 2008 PPA wieghted Treasury/Corporate interest rates with the much lower 30 year Treasury rate (yielding an increased payout of course)?

I think someone is weighting in the wings to snag us on this !

[Guest L337pwner5]

Your answer may be in the transition rule described in Q&A 16 and 17 of Notice 2008-30. The way I read it, you can amend the plan to provide that lump sum payments in 2008 and 2009 are calculated as the greater of the benefit that results from using the pre-PPA rate and mortlaity table and the post-PPA rate and mortality table. If you do that, then your midyear lump sum payment was A-okay.

Although if anyone disagrees with how I'm reading 2008-30, now would be a good time to chime in.

Notice_2008_30.pdf

[Guest DBPension]

Your answer may be in the transition rule described in Q&A 16 and 17 of Notice 2008-30. The way I read it, you can amend the plan to provide that lump sum payments in 2008 and 2009 are calculated as the greater of the benefit that results from using the pre-PPA rate and mortlaity table and the post-PPA rate and mortality table. If you do that, then your midyear lump sum payment was A-okay.

Although if anyone disagrees with how I'm reading 2008-30, now would be a good time to chime in.

Notice_2008_30.pdf

Per my reading, Notice 2008-30 Q16 addresses a QJSA issue and assumes a plan amendment HAS already been adopted during the period established in the 1107(b)(2)(A) (12/31/09 in my example), so this does not address the situation that I am addressing ... where the amendment has NOT been adopted by 12/31/09.

Q17 discusses a different issue, but also assumes that an amendment has ALREADY been adopted during the period established in the 1107(b)(2)(A), so it similarly does not address the situation that I am addressing.

I am specifically addressing the situation when the Plan amendment deadline in 1107(b)(2)(A) (12/31/09 in my case) IS MISSED and asking if there is any way to get around NOT having to recalculate a midyear 2009 Lump Sum payout (originally calculated with the 2006 PPA weighting of Treasury and 3-segment Corporate Bond rate) using the (pre 2006 PPA) lower 30-year Treasury rates yielding a higher Lump Sum ?

Any way around this ?

[Guest DBPension]

Your answer may be in the transition rule described in Q&A 16 and 17 of Notice 2008-30. The way I read it, you can amend the plan to provide that lump sum payments in 2008 and 2009 are calculated as the greater of the benefit that results from using the pre-PPA rate and mortlaity table and the post-PPA rate and mortality table. If you do that, then your midyear lump sum payment was A-okay.

Although if anyone disagrees with how I'm reading 2008-30, now would be a good time to chime in.

Notice_2008_30.pdf

Per my reading, Notice 2008-30 Q16 addresses a QJSA issue and assumes a plan amendment HAS already been adopted during the period established in the 1107(b)(2)(A) (12/31/09 in my example), so this does not address the situation that I am addressing ... where the amendment has NOT been adopted by 12/31/09.

Q17 discusses a different issue, but also assumes that an amendment has ALREADY been adopted during the period established in the 1107(b)(2)(A), so it similarly does not address the situation that I am addressing.

I am specifically addressing the situation when the Plan amendment deadline in 1107(b)(2)(A) (12/31/09 in my case) IS MISSED and asking if there is any way to get around NOT having to recalculate a midyear 2009 Lump Sum payout (originally calculated with the 2006 PPA weighting of Treasury and 3-segment Corporate Bond rate) using the (pre 2006 PPA) lower 30-year Treasury rates yielding a higher Lump Sum ?

Any way around this ?

As suggested in one of the comments ... is going through a VCP for a nonamender failure ... a way to avoid re-calculating the Lump Sum using the pre-2006-PPA straight 30-year Treasury Bond rate, or is there no way to avoid the re-calc ... and HIGHER payout ?.

[Guest L337pwner5]

So the 2009 midyear payout was calculated using the PPA segment rates? If that's the case, then you shouldn't have to recalculate when you go through the VCP nonamender, since you will be conforming the plan document to actual plan operations, which were in compliance with the law at the time. I misread your previous comment to mean that you had calculated the 2009 payment using the 30 year treasury rate.

[Guest DBPension]

So the 2009 midyear payout was calculated using the PPA segment rates? If that's the case, then you shouldn't have to recalculate when you go through the VCP nonamender, since you will be conforming the plan document to actual plan operations, which were in compliance with the law at the time. I misread your previous comment to mean that you had calculated the 2009 payment using the 30 year treasury rate.

Here's a question for everyone ...

Sounds like a way out of increasing the Lump Sum payout, but curiously, what's the point of a "deadline" for a conforming Plan Amendment (in this case 12/31/09, fully 28 months after the 8/2006 passage of the 2006 PPA) if the plan can simply AVIOD the consequences of its delinquency via a VCP filing AFTER the deadline has passed? Seems to promote a "complaince-is-not-important attitude".