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Review Terminating Plans for Compliance, IRS Reminds

The IRS has issued a reminder that plans terminating in the 2016 plan year should be reviewed to make sure they are in compliance with applicable laws in effect on the date of termination.

This is consistent with Revenue Procedure 2016-6, which the IRS issued on Jan. 4, which provides that a terminating plan must be amended for all current law applicable to the plan even if the date by which the plan is required to be amended has not yet passed.

The report provides a list, not all-inclusive, of the 2015 cumulative changes to plan qualification requirements enumerated in IRS Notice 2015-84 against which terminating plans should be reviewed. Those changes include the following.

Notice 2015-28, 2015-14 I.R.B. 848, extends the temporary nondiscrimination relief previously established in Notice 2014-5 for certain “closed” defined benefit plans.

Notice 2015-49, 2015-30 I.R.B. 79, informed taxpayers that amendments would be proposed to the Internal Revenue Code Section 401(a)(9) required minimum distribution regulations to address the use of lump sum payments to replace annuity payments being paid by a qualified DB plan and that those amendments are intended to apply as of July 9, 2015, except regarding certain accelerations of annuity payments described in the notice.

Division P of the Consolidated and Further Continuing Appropriations Act of 2015, Pub. L. No. 113-235, section 2, added Code Section 411(f), which provides a special rule for determining normal retirement age for certain existing DB plans.

Section 2007 of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 amended Code Section 420 to extend the provisions relating to transfers to Dec. 31, 2025.

Code Section 432(e)(9), as amended by the Multiemployer Pension Reform Act of 2014 (MPRA), permits plan sponsors of multiemployer plans to suspend benefits if certain conditions are satisfied.

Temporary regulations implementing amendments the MPRA made to Code Section 432(e)(9) and ERISA Section 305(e)(9) provide guidance to enable plan sponsors of multiemployer plans to suspend benefits when such a plan is determined to be in critical and declining status.