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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
On March 10, 2010, the Senate passed the American Workers, State and Business Relief bill (H.R. 4213) by a vote of 62 to 36. While the focus of the legislation is the extension, generally through 2010, of several dozen tax provisions that had expired at the end of 2009, the bill includes pension funding relief and provisions that allow distributable 401(k) account balances to be converted to Roth accounts within the 401(k) plan.
The legislation differs in several respects from the extenders legislation passed by the House on December 9, 2009. The House bill does not include either the pension funding provisions or the 401(k) provisions. It appears likely that a House/Senate conference will be held to resolve differences between the two bills.
Pension funding relief
The bill provides temporary targeted funding relief for plans affected by the steep market decline in 2008. Employers would be permitted to elect one of two special amortization schedules: (1) a "2-and-7" rule or (2) a 15-year rule. Under the 2-and-7 rule, employers would be able to amortize their shortfall over seven years, but during the first two years, the employer would only owe interest on the shortfall. Under the 15-year rule, employers would be able to amortize their shortfall over 15 years. Employers would be entitled to apply either rule for any of two plan years 2009, 2010, and 2011.
An employer taking advantage of the pension funding relief would be required to satisfy a "cash flow rule." Under this rule, a plan sponsor that elects to use the 2-and-7 rule or the 15-year rule would have to make a contribution to the plan equal to the sum of (1) the aggregate excess employee compensation over $1 million (indexed) or (2) aggregate amount of extraordinary dividends and redemptions for the plan year.
401(k) provisions
The bill would authorize a 401(k) plan to allow plan participants experiencing a distributable event to directly roll over the distribution to a Roth 401(k) account maintained under the 401(k) plan for the benefit of the individual to whom the distribution is made. Accordingly, the amendment would eliminate the need for participants to roll over a plan distribution to a Roth IRA in order to experience the tax benefits of Roth arrangements, including the deferred tax on 2010 conversions. In addition, the provision would effectively keep the participant's money in the plan, thereby potentially reducing "leakage" from the participant's account. A similar provision would allow state and local government employees participating in 457 plans to treat elective deferrals as Roth contributions.
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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