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CCH® PENSION AND BENEFITS — 1/12/07

IRS issues 2006 cumulative list of changes for individually designed plans

The IRS has published the 2006 Cumulative List of Changes in Plan Qualification Requirements (2006 Cumulative List) that informs plan sponsors of issues the IRS has specifically identified for review in determining whether an individually designed plan, multiple employer plan or defined benefit pre-approved plan has been properly updated. The 2006 Cumulative List is to be used primarily by: (1) plan sponsors of single-employer individually designed defined contribution plans, including ESOPs, single-employer individually designed defined benefit plans and plan sponsors of multiple-employer plans that fall in Cycle B and (2) plan sponsors and practitioners in drafting defined benefit pre-approved plans (that is, defined benefit plans that are master and prototype (M&P) or volume submitter (VS) plans) for their first submission under the initial remedial amendment cycle under Rev. Proc. 2005-66 (see CCH Pension Plan Guide ¶17,131U ). An individually designed plan is in Cycle B if the last digit of the employer identification number is 2 or 7. Multiple employer plans are also in Cycle B.

The IRS will start accepting determination letter applications for Cycle B individually designed plans and multiple employer plans beginning on February 1, 2007. The 12-month submission period for Cycle B individually designed plans and multiple employer plans will end January 31, 2008. In addition, the IRS will start accepting opinion and advisory letter applications for defined benefit pre-approved plans beginning on February 1, 2007. The 12-month submission period for non-mass submitter sponsors and practitioners, word-for-word identical adopters, and M&P minor modifier placeholder applications will end January 31, 2008. The 9-month submission period for mass-submitters and national sponsors will end October 31, 2007.

List highlights PPA provisions effective in 2006 and 2007

The 2006 Cumulative List reflects law changes under EGTRRA, the Pension Funding Equity Act of 2004, the American Jobs Creation Act of 2004, the Gulf Opportunity Zone Act of 2005, and certain law changes under the Pension Protection Act (PPA; P.L. 109-280) that are effective in 2006 and 2007. A plan amendment made pursuant to any amendment made by the PPA generally may be retroactively effective, if, in addition to meeting the other applicable requirements, the amendment is made on or before the last day of the first plan year beginning on or after January 1, 2009 (January 1, 2011 in the case of a governmental plan).

The PPA provisions in the 2006 Cumulative List include:

• The requirement that defined contribution plans provide employees with the freedom to divest publicly traded securities;

• The new rules for cash balance and hybrid plans;

• The hardship distribution requirements for 401(k) plans;

• The new rollover rules for nontaxable distributions and for nonspouse beneficiaries;

• The provision of faster vesting of employer nonelective contributions;

• The rules pertaining to interest rate assumptions for applying benefits limitations to lump-sum distributions; and

• The notices required to be provided under Code Secs. 402(f), 411(a)(11), and 417.

For more information on this and related topics, consult the CCH Pension Plan Guide.

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