• Deadline for Defined Benefit Plan Sponsors to Adopt a Code Section 436 Amendment Extended ... Again
  • November 29, 2012 | Authors: Jonathan A. Kenter; Adam M. Meehan
  • Law Firms: Troutman Sanders LLP - New York Office ; Troutman Sanders LLP - Atlanta Office
  • The Internal Revenue Service recently announced in Notice 2012-70 that the deadline for adopting an interim amendment to comply with Section 436 of the Internal Revenue Code is extended. The announcement also extends anti-cutback relief to plan sponsors who comply with the applicable deadlines.
     
    Background
     
    Code Section 436 was added by the Pension Protection Act of 2006 to limit the accrual and payment of benefits from underfunded single-employer defined benefit plans. Originally, plan sponsors were obligated to amend their plans to include provisions addressing the Code Section 436 requirements before the last day of the plan year that began in 2009. In addition, timely adopted 436 amendments afforded plan sponsors relief from the anti-cutback provisions of the Code. The IRS has repeatedly extended the deadline for adopting a Code Section 436 amendment and the related anti-cutback relief, most recently to the last day of the plan year beginning in 2012.
     
    Notice 2012-70
     
    Under the new extension, the deadline for plan sponsors to adopt interim Code Section 436 amendments, and be afforded the related relief from the Code’s anti-cutback provisions, was extended to the latest of: (i) the last day of the first plan year that begins on or after January 1, 2013; (ii) the last day of the plan year for which Code Section 436 is first effective for the plan; or (iii) 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 Code Section 436 is first effective for the plan.
     
    Furthermore, a Code Section 436 amendment need not be included in an application for a determination letter filed by January 31, 2013. An application for a determination letter filed on or after February 1, 2013, however, must include a Code Section 436 amendment incorporated into a restated plan. Accordingly, plan sponsors who apply for a determination letter on or after February 1, 2013, but before the last day of the 2013 plan year, will have an accelerated deadline to adopt the Code Section 436 amendment - the date that the application for a determination letter is filed.