Is Amendment under HATFA for Section 436 Restriction Required?

[rocknrolls2]

HATFA section 2003©(1) amended Section 436(d)(2) of the Code to provide that if an employer sponsoring a defined benefit plan is in bankruptcy, no prohibited payment may be made unless the plan's actuary certifies that the AFTAP of the Plan is not less than 100%. For this purpose, the determination is to be made without regard to the amendment to extend the minimum and maximum percentages of the segment rate to 90% and 110% from merely 2012 to 2012 through and including 2017 (a subsequent amendment extended the application of such percentages through to 2020).

In working on a sale of the employer, the lawyer for the buyer suggested that the plan has to be amended prior to closing to provide for such an amendment. The proposed amendment seems to be merely parroting the statutory change made by HATFA and not adding anything to facilitate the implementation of such change.

I looked further into this. While IRS Notice 2015-84, which contains the 2015 cumulative list, references certain changes to Code Section 436, there is no direct reference in the Cumulative List to the HATFA changes, other than a cross-reference to a 2014 notice dealing with the HATFA changes. Since the proposed amendment appears to be merely parroting the statutory change, I would conclude that such an amendment would not be required since it would already apply by statutory operation.

Any thoughts either way on this?

[My 2 cents]

It was my understanding that for purposes of implementing the Section 436 benefit restrictions when the plan sponsor is in bankruptcy, effective in 2015 NONE of the funding relief provisions can be reflected. That is, the AFTAP has to be 100%+ using the non-relief segment rates. One cannot use the originally schedule MAP-21 relief rates at all.

[Trisports]

It was my understanding that if the DB plan incorporates the limitations of sect 436(d)(2) by reference to the statute or regulations, or by adopting the sample amendment in Notice 2011-96, then no amendment would be required