IRS 2012 Cumulative List

PENSION BENEFITS

December 2012 by Susan Quintanar and Ronald J. Triche

The Internal Revenue Service (the "Service") recently released Notice 2012–76, which contains the 2012 Cumulative List of Changes in Plan Qualification Requirements (the "2012 Cumulative List") described in Section 4 of Revenue Procedure 2007–44. The 2012 Cumulative List is to be used by plan sponsors and practitioners submitting determination letter applications for plans during the period beginning February 1, 2013 and ending January 31, 2014.

The 2012 Cumulative List applies primarily to the plan sponsors of individually–designed defined contribution plans (including ESOPs) and single employer individually–designed defined benefit plans that are in Cycle C, as well as governmental plans (including governmental multiemployer or multiple employer plans) that choose to file during Cycle C. Generally, an individually–designed plan is in Cycle C if the last digit of the plan sponsorís employer identification number ("EIN") ends in either 3 or 8.

The 2012 Cumulative List also applies to sponsors of defined benefit pre–approved plans (i.e., master and prototype ("M&P") or volume submitter ("VS") plans) for the second submission under the remedial amendment cycle set forth in Revenue Procedure 2007–44.

The 2012 Cumulative List informs plan sponsors of areas the Service has specifically identified for review in determining whether a plan filing in Cycle C has been properly updated. The 2012 Cumulative List specifically addresses law changes under the Pension Protection Act of 2006 ("PPA ’06"); the U.S. Troop Readiness, Veteranís Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007; the Heroes Earnings Assistance and Relief Tax Act of 2008 ("HEART Act"); the Worker, Retiree, and Employer Recovery Act of 2008 ("WRERA"); the Small Business Jobs Act of 2010 ("SBJA"); the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 ("PRA 2010"); and the Moving Ahead for Progress in the 21st Century Act ("MAP-21").

In this review cycle, the Service said that it will not consider any of the following:

  • Guidance published after October 1, 2012
  • Statutes enacted after October 1, 2012
  • Qualification requirements first effective in 2014 or later
  • Statutory provisions that are first effective in 2013 for which there is no guidance identified in the 2012 Cumulative List
  • The 2010 final hybrid plan regulations (other than Internal Revenue Code ("Code") section 411(a)(13)(A), with respect to the special rules for plans computing accrued benefits by reference to hypothetical account balances or equivalent amounts), unless the plan has been amended to satisfy those regulations and then only with respect to those provisions of the regulations that are in effect for plan years beginning on or after January 1, 2011
  • Terminating plans must include all law changes in effect at the time of termination.

    The 2012 Cumulative List includes those plan qualification requirements included in the 2008, 2009, 2010 and 2011 Cumulative Lists, as well as additional 2012 plan qualification requirements. It also includes those plan qualification requirements listed in the 2007 Cumulative List that are applicable to defined benefit pre–approved plans. The cumulative lists in effect prior to these dates (i.e., 2004 through 2006 and 2007 (with respect to defined contribution plans)) have been deleted. The utility of the cumulative list was enhanced by removing items that would have been previously reviewed in the case of a plan that was submitted during the initial Cycle C submission period (February 1, 2008 – January 31, 2009). In the case of a plan that has not been previously reviewed for items on earlier cumulative lists, the items from the earlier cumulative lists must be taken into account (such as in the case of a new plan that was established after the Cycle C submission period).

    The 2012 Cumulative List includes the following "new" plan qualification requirements listed by section of the Code. All references are to the Code and Treasury Regulations unless otherwise specified.

    401(a)

  • Under Notice 2012–6, transition relief (provided by Revenue Ruling 2011–1) is extended and expanded for certain group trusts, certain retirement trusts which qualify under the Puerto Rico Code that participate in group trusts, and certain qualified retirement plans that benefit Puerto Rico residents. Additional time is also provided to amend certain governmental retiree benefit plans described in Code section 401(a)(24) to satisfy applicable requirements of Revenue Ruling 2011-1.
  • Notice 2012–29 states that the Service anticipates issuing guidance modifying the normal retirement age regulations to clarify that governmental plans which do not provide for in-service distributions before age 62 would not need to include a definition of normal retirement age. The Notice also addresses clarifying the age–50 safe harbor rule for qualified public safety employees and amending the normal retirement age regulations to extend the effective date for governmental plans to annuity starting dates that occur in plan years beginning on or after the later of:
  • January 1, 2015, or
  • the close of the first regular legislative session of the legislative body with the authority to amend the plan that begins on or after the date that is 3 months after the final regulations are published in the Federal Register.
  • 411(a)

  • Revenue Ruling 2012–4 clarifies whether a qualified defined benefit pension plan that accepts a direct rollover of an eligible rollover distribution from a qualified defined contribution plan maintained by the same employer satisfies Code sections 411 and 415 in a case in which the defined benefit plan provides an annuity resulting from the direct rollover.
  • 411(a)(13)

  • Under Notice 2012–61, certain provisions in the 2010 final hybrid plan regulations will not be in effect for plan years beginning before January 1, 2014.
  • 411(b)(5)

  • Under Notice 2012–61, certain provisions in the 2010 final hybrid plan regulations will not be effect for plan years beginning before January 1, 2014.
  • 411(d)(6)

  • The final regulations under Code section 411(d)(6) provide an additional limited exception to the anti–cutback rules to a plan sponsor who is a debtor in a bankruptcy proceeding (published on October 8, 2012 (77 Fed Reg. 66915)).
  • 415

  • Revenue Ruling 2012–4 clarifies whether a qualified defined benefit pension plan that accepts a direct rollover of an eligible rollover distribution from a qualified defined contribution plan maintained by the same employer satisfies Code sections 411 and 415 in a case in which the defined benefit plan provides an annuity resulting from the direct rollover.
  • 417

  • Revenue Ruling 2012-3 states how the qualified joint and survivor annuity ("QJSA") and qualified preretirement survivor annuity ("QPSA") rules, described in Code sections 401(a)(11) and 417, apply when a deferred annuity contract is purchased under a profit sharing plan.
  • 420

  • Under sections 40241 and 40242 of MAP–21, amendments to Code section 420 were made to extend the provisions relating to transfers of excess pension assets to retiree health accounts and to expand those provisions to allow transfers to retiree group term life insurance accounts.
  • 436

  • Under Treasury Regulation section 1.436–1, guidance is provided on the application of Code section 436, which sets forth a series of limitations on the accrual and payment of benefits under underfunded single employer defined benefit plans.
  • Under Notice 2011–3, guidance is provided on the special rules relating to the relaxation of Code section 436 rules that were included in the funding relief for single employer defined benefit pension plans under PRA 2010.
  • Notice 2011–96 provides a sample plan amendment that plan sponsors may adopt to satisfy Code section 436 with respect to the limitations on the accrual and payment of benefits. The Notice also extends both the deadline to amend a plan to satisfy the requirements of Code section 436 and the period during which such an amendment is eligible for relief from the anti–cutback requirements of Code section 411(d)(6).
  • Under Notice 2012–70, the deadline (as described in Notice 2011–96) is extended to amend a defined benefit pension plan to satisfy the requirements of Code section 436. The Notice also provides associated relief from the requirements of Code section 411(d)(6).
  • If you have any questions regarding these provisions or your need to update your plan(s), please contact the Trucker Huss attorney with whom you regularly work.




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