- The IRS announced March 25 that it has expanded automatic approval opportunities for single-employer defined benefit plans. It provides automatic approval of a change in funding method regarding a single-employer DB plan under certain circumstances in which the change in method results from a change in the plan’s enrolled actuary.
This automatic approval will apply for plan years beginning on or after Jan. 1, 2013 for plans that meet the conditions outlined in Announcement 2015-3. That announcement was the subject of ASPPA asap 2015-03, “Change in Actuary on Plan Takeover? Announcement 2015-3 Addresses Automatic Approval for Change in Funding Method,” published Jan. 15, 2015 and written by Judy Miller, ASPPA Director of Retirement Policy and ACOPA Executive Director. The new stance the IRS has taken is an expansion of the automatic approval opportunities previously available to single-employer DB plans under Announcement 2010-3.
If the plan qualifies for automatic approval, the new enrolled actuary may use new actuarial assumptions and a new funding method for the current plan year only if those changes are permitted under the generally applicable requirements of Internal Revenue Code Sections 430(h) and 412(d)(1).
The March 25 announcement expands the automatic approval in Announcement 2010-3 by allowing the new actuary to:
1. perform the 5% comparison for the year in which the takeover occurs (instead of requiring that the new actuary compare the results for the prior year); and
2. use a signed actuarial valuation report issued by the prior enrolled actuary for the plan (instead of requiring the comparison to be made based on the plan’s Schedule SB).
One area in which the IRS expects that this will be particularly helpful is regarding the change in interest rates used for minimum funding purposes under the Highway and Transportation Funding Act of 2014 (HATFA). Under HATFA, a plan sponsor is allowed to use the HATFA interest rates retroactively for the 2013 plan year, even if the 2013 Schedule SB was already filed.
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