The Internal Revenue Service has issued defined benefit pension plan guidance that will affect a handful of commercial airline plans.
The guidance, given in IRS Notice 2006-105, spells out the rules sponsors of commercial airline plans must follow to take advantage of the plan funding relief provision included in the new federal Pension Protection Act of 2006.
The provision permits eligible airlines with underfunded pension plans to make a small “alternative deficit reduction contribution,” rather than the full contribution that they normally would have to make to correct the underfunding, for any plan year beginning after Dec. 27, 2003, and before Dec. 28, 2007.
Airlines using the provision must notify employees and the Pension Benefit Guaranty Corp. pension insurance program.
“If, on or before Dec. 21, 2006, an employer makes an alternative deficit reduction contribution election for the first plan year beginning on or after Dec. 28, 2005, that election will be deemed timely,” IRS officials write in the notice, which is posted on the IRS Web site. “In addition, if an employer issues a PBGC notice for a plan for such a plan year on or before Dec. 21, 2006, the PBGC will treat the PBGC notice as timely issued.”
The PBGC notice should reflect a reasonable effort to incorporate the effects of the PPA, officials write.
A copy of the notice is on the Web at Document Link