October 30, 2012 – The Pension Protection Act of 2006 (“PPA”) added a new section to the Internal Revenue Code. Code Section 436 (“Section 436”) sets forth limitations on benefit payments and accruals for defined benefit plans that are “underfunded.”
Since the passage of PPA, Congress has revised the applicable funding rules and the IRS has issued at least five pieces of formal guidance on Section 436. This has led to delays in the deadline for adopting the amendment as well as delays in the issuance of a model amendment by the IRS.
The IRS has now issued the model amendment and is requiring that all defined benefit plans that are subject to the minimum funding requirements be amended. The amendment brings the plans into full compliance with funding-based benefit accrual and distribution limitations.
Generally, plans must adopt this amendment by no later than December 31, 2012. Nyhart will be mailing the amendment to all affected plans in the next couple of weeks.
If you have questions about the amendment, please contact your Nyhart consultant.