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Regulation and Compliance > Federal Regulation > IRS

IRS Answers Pension Relief Questions

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The Internal Revenue Service (IRS) has answered many highly technical questions about how to apply the new single-employer pension plan funding relief rules.

The IRS gives the answers in IRS Notice 2011-3, a batch of guidance developed to help employers use the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PRA).

Congress enacted PRA to keep employers hit hard by the Great Recession from dropping pension plans, by temporarily easing the effects of new rules plan sponsors were supposed to be using to calculate plan funding levels and contribution requirements.

The new guidance covers topics such as installment acceleration amounts, the interaction of the relief rules with mergers and acquisitions, elections to use an alternative amortization schedule, and transition rules.

In the transition section, for example, officials answer questions such as, “What are the consequences if a plan sponsor made an election to use an alternative amortization schedule prior to Jan. 1, 2011, but the election did not include all of the information required in … this notice?”

If a plan sponsor decides to use an alternative amortization schedule before Jan 1, 2011, but it failes to meet all of the requirements spelled out in IRS Notice 2011-3, “the fact that the sponsor did not meet all such requirements does not invalidate the election, and does not permit the sponsor to revoke that election without receiving approval from the IRS,” officials say.

Any sponsor that decides to use an alternative amortization schedule is supposed to notify participants of the decision by 120 days after the end of the plan year for which the alternative amortization schedule is elected, or by May 2, 2011, if May 2, 2011, comes later.

If a sponsor uses an alternative amortization schedule with a plan covered by the Pension Benefit Guaranty Corp. (PBGC), the sponsor must e-mail the PBGC kinds of information listed in the new notice, officials say.

The required information includes:

  1. The name of the plan.
  2. The plan number.
  3. The name of the plan sponsor.
  4. The plan sponsor’s mailing address.
  5. The plan sponsor’s employer identification number.
  6. Which of the two alternative amortization schedules is being elected.
  7. The plan year for which the election is being made.
  8. Whether an alternative amortization schedule has been elected for another year, and, if so, a statement that the same alternative amortization schedule is being elected.
  9. A statement that the plan sponsor will notify the PBGC and plan participants and beneficiaries of the change.


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