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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.
Recently proposed regulations relaxing the notification requirements for underfunded defined benefit plans under Code Sec. 4980F (CCH Pension Plan Guide ¶20,262J ) are a great improvement, but could be even better if several more improvements are made, according to testimony given at a July 10, 2008, hearing at IRS headquarters in Washington, DC. According to Judith Mazo, on behalf of the National Coordinating Committee for Multiemployer Plans (NCCMP), and Kent Mason, representing the American Benefits Council, the regulations could be clearer on two counts: (1) the operation of the duplicative notice prevention rules for underfunded individual plan amendments; and (2) the duration of the 30-day notification rule for underfunded multiemployer plan amendments that reduce benefits.
Testifying with respect to single-employer plans, Mason applauded the IRS’s efforts in the proposed regulations to eliminate duplicative notification requirements. The proposed regulations would do away with requiring a general amendment notice under Code Sec. 4980F if other, more specific, notice requirements have been “satisfied” for certain listed events, including the reduction of benefit accruals by underfunded plans. As another example, if a plan simultaneously notifies employee participants of amendments to comply with the benefit limitations of Code Sec. 436, Mason observed that the plan would not be required to also give a general notice of amendment under Code Sec. 4980F.
However, while applauding that simplification, Mason also sought clarification of how the simplification would operate in instances in which a plan may already “satisfy” the notice requirements for those listed events and, therefore, may not be required to take any action at all. Mason argued that, in these instances, it seemed that “satisfaction” of the notice requirements would result in no notice to the employees at all for any plan amendments.
“If I’m a plan and I’m never subject to the Code Sec. 436 benefit restriction limitations because I’m 102-percent funded, have I satisfied the notice requirements? I haven’t done anything! I’ve done everything that was required, which was nothing. The question is, have I ‘satisfied’ those rules? I think the intent was yes, but it’s a little hard to get there legally by saying that doing nothing ‘satisfied’ those rules,” Mason stated.
The proposed regulations would also allow a special timing rule for underfunded cash balance or other hybrid plans. Upon amending these types of plans to reduce accruals, the plan must provide notice to the employee participants within 30 days before the date the amendment is effective. Mazo, testifying with respect to multiemployer plans, requested clarification of whether this notice could be given more than 30 days in advance. She reasoned that giving notice in advance of the 30 days would allow employers and participants both more time to plan on how to proceed in light of the amendments and greater opportunity to renegotiate or fine-tune the terms of the amendments to the plan.
“This is particularly necessary in the statutory situation where plans are going to want to say ‘Here’s the benefit reduction that will go into effect if your union and employer negotiate’,” Mazo reported. “Funds want to let everyone know ‘this is the choice your employer and your representatives are going to have.’ For example, if the choice is more contributions and milder benefit cuts or less contributions and serious benefit cuts. They want everyone to know that.”
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