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CCH® PENSION AND BENEFITS — 05/12/09

IRS extends election date under WRERA for underfunded multiemployer plans

The IRS has extended the election date for sponsors of multiemployer defined benefit plans that are significantly underfunded, required under the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA), from April 30, 2009 to June 30, 2009.

In Notice 2009-31, the IRS issued guidance to sponsors of significantly underfunded multiemployer plans for making certain elections under Sections 204 and 205 of WRERA. Code Sec. 432 , added by the Pension Protection Act of 2008 (PPA; P.L. 109-280), provides rules for underfunded multiemployer defined benefit plans. Actuaries for such plans are required by the 90th day of each plan year to certify as to the plan’s “section 432 status” — whether the plan is in endangered status, critical status, or neither status for the plan year.

Section 204 of WRERA provides that a multiemployer plan sponsor may elect to temporarily freeze the plan’s section 432 status so that it is the same as the plan’s section 432 status for the plan year immediately prior to the election year. Section 205 of WRERA provides for an elective extension of the funding improvement period or rehabilitation period for multiemployer plans in endangered or critical status.

Election date extended to June 30, 2009

In Notice 2009-31, the IRS specified that an election under section 204 must be made by the later of April 30, 2009 and the date that is 30 days after the due date of the annual certification of section 432 status for the election year. The notice also specified that an election under section 205 must be made by the last day of the plan year as of which the election is being made, or, if earlier, by the date a funding improvement plan, rehabilitation plan, or update is adopted that takes into account the election. However, under Notice 2009-31, the election was not required to be made earlier than April 30, 2009.

Because some sponsors of multiemployer plans have identified a legitimate need for additional time to make these elections in particular situations, the IRS has extended the applicable date from April 30, 2009 to June 30, 2009. In addition, if: (1) as of the otherwise applicable deadline (i.e., the deadline for a plan as modified) for making an election under section 204 or 205, a plan sponsor has been unable to reach agreement as to whether to make the election, so that the decision must be resolved through an arbitration process; (2) the plan sponsor makes an election by the otherwise applicable deadline that is contingent on the resolution of the arbitration; and (3) the resolution is to not make an election, then the IRS will automatically approve a request to revoke the election.

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