IRS Issues Sample IRC Section 436 Plan Amendment and Extends Amendment Deadline | Practical Law

IRS Issues Sample IRC Section 436 Plan Amendment and Extends Amendment Deadline | Practical Law

On November 30, 2011, the IRS issued Notice 2011-96, which provides a sample plan amendment to satisfy IRC Section 436 regarding limitations on the accrual and payments of benefits under certain underfunded single employer defined benefit plans. The notice also extends the deadline for a plan amendment.

IRS Issues Sample IRC Section 436 Plan Amendment and Extends Amendment Deadline

Practical Law Legal Update 2-514-4714 (Approx. 4 pages)

IRS Issues Sample IRC Section 436 Plan Amendment and Extends Amendment Deadline

by PLC Employee Benefits & Executive Compensation
Published on 01 Dec 2011 • USA (National/Federal)
On November 30, 2011, the IRS issued Notice 2011-96, which provides a sample plan amendment to satisfy IRC Section 436 regarding limitations on the accrual and payments of benefits under certain underfunded single employer defined benefit plans. The notice also extends the deadline for a plan amendment.
On November 30, 2011, the IRS issued Notice 2011-96, which:
  • Provides a sample plan amendment regarding limitations on the accrual and payment of benefits under certain underfunded single employer defined benefit plans.
  • Expands the deadline to amend a plan to the latest of:
    • the last day of the first plan year that begins on or after January 1, 2012;
    • the last day of the plan year for which Internal Revenue Code (IRC) Section 436 is first effective for the plan; or
    • the due date (including extensions) of the employer's tax return for the tax year that contains the first day of the plan year for which IRC Section 436 is first effective for the plan.
IRC Section 436 was added by the Pension Protection Act of 2006 and sets out a series of limitations on the accrual and payment of benefits under an underfunded plan. Under prior guidance, calendar year defined benefit plans previously had until December 31, 2011 to amend for these provisions. The extension is conditioned on:
  • The amendment being effective as of the effective date of IRC Section 436 with respect to the plan.
  • Operation of the plan according to the amendment from and after the effective date of the amendment.
IRC Section 411(d)(6) generally provides that a plan may not be amended to decrease a participant's accrued benefit. Under the notice, if the adoption of the amendment (by the deadline) causes a plan to eliminate or reduce an IRC Section 411(d)(6) protected benefit and the elimination or reduction is made solely to satisfy IRC Section 436, the elimination or reduction does not cause the plan to fail to meet the anti-cutback requirements of IRC Section 411(d)(6).
For more information on recent IRS guidance relating to the extension of IRC Section 411(d)(6) amendments for hybrid plan changes under the Pension Protection Act, see Legal Update, IRS Postpones Effective Date of Interest Crediting Rules for Cash Balance and Hybrid Plans.