Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has announced the expansion of transition relief for certain small single-employer defined benefit plans originally provided in Notice 2008-21, I.R.B. 2008-7, 431. Limitations on the accrual and payment of benefits of an underfunded single-employer defined benefit plan underCode Sec. 436 are applied based on a plan's adjusted funding target attainment percentage (AFTAP) for the plan year. The AFTAP is generally based on the plan's funding target attainment percentage (FTAP) for the plan year.

  A series of presumptions apply during the portion of the plan year that precedes the certification of the AFTAP. For example, plans subject to the benefit limitations for the preceding plan year are presumed to be subject to the limitations in the current year until the plan actuary certifies the actual AFTAP for the current year. For other than small plans with fewer than 100 participants, underCode Sec. 430(g), the valuation date for the plan year must be the first day of the plan year.

  The IRS issued Notice 2008-21 to provide a transition rule for small plans with end-of-the-year valuation dates. Under the transition rule, for a plan with an end-of-the-year valuation date for each of the plan years beginning in 2006, 2007 and 2008, for purposes of applying the benefit limitations for the plan year during 2008, the AFTAP for the 2007 plan year may be made by determining the FTAP for the 2007 plan year under special rules.

  Because Congress is considering, but has not yet enacted, technical corrections that would provide the IRS and Treasury Department with the authority to issue regulations addressing end-of-year valuation dates, many small plans may adopt beginning-of-the-year valuation dates. Plans that adopt a beginning-of-the-year valuation date for the 2008 plan year will be ineligible for the transition relief in Notice 2008-21 and will have difficulty in complying with the timing requirements for certifying the plan's AFTAP. Thus, the transition relief is expanded to apply with respect to any plan that has an end-of-year valuation date for both the 2006 and 2007 plan years, regardless of the plan's valuation date for 2008.

Notice 2008-73, 2008FED ¶46,559

Other References:

 
Code Sec. 430

  CCH Reference - 2008FED ¶20,161.60

 
Code Sec. 436

  CCH Reference - 2008FED ¶20,221.01

  Tax Research Consultant

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