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Qualified Plan Year-End Amendment Deadlines Are Lurking
November 23, 2010
Many 2010 year-end amendments are required of qualified plans. This list is meant to be illustrative rather than exhaustive, and the deadlines listed in the amendment are general deadlines applying to calendar year non-governmental plans.
Pension Protection Act
- Effective for plan years beginning after December 31, 2006, an amendment to a defined contribution plan must generally be adopted on or before December 31, 2010 providing each participant in a defined contribution plan that holds publicly-traded employer securities that are readily tradable on an established securities market with the freedom to divest himself of these publicly-traded employer securities and to invest this portion of his account in an alternative investment.
- Effective for plan years beginning after December 31, 2007, defined benefit plans must be amended to satisfy Section 436 of the Internal Revenue Code of 1986, as amended, which contains a series of limitations on the accrual and payment of benefits in the case of certain underfunded plans. The amendment deadline was extended to December 31, 2010, for calendar year plans, under Notice 2009-97 while plan sponsors waited for final regulations to be issued. These final regulations have still not been issued. Although there is discussion of another extension, no extension of the amendment deadline has been announced at this time. Accordingly, plan sponsors should aim to amend their defined benefit plans for Section 436 compliance on or before December 31, 2010.
- Effective for plan years beginning after December 31, 2001 (and for distributions made after August 17, 2006), cash balance and other applicable defined benefit plans must comply with special vesting and benefit accrual rules. Amendments must be adopted on or before December 31, 2010.
Heroes Earnings Assistance and Relief Tax Act of 2008 (the "HEART" Act)
- Effective for plan years beginning after December 31, 2008, qualified plans must be amended to include "differential wage payments" in the definition of compensation for plan purposes. This amendment is mandatory and must be adopted on or before December 31, 2010. Optionally, plans may also treat "differential wage payments" as compensation for contributions and benefits purposes.
- Effective for deaths occurring on or after January 1, 2007, qualified plans must provide that, in the case of a participant who dies while performing military service, the survivors of the participant are entitled to any additional benefits (other than benefit accruals during the period of military service) provided under the plan had the participant resumed and then terminated employment on account of death. This amendment is mandatory and must be adopted on or before December 31, 2010.
- Plans may be amended to provide for the accrual of benefits during the period of military service for a participant who dies or becomes disabled while performing military service. This optional amendment may be applied for deaths or disabilities on any date occurring on or after January 1, 2007.
- Effective for plan years beginning after December 31, 2008, participants who are performing military service may be treated as having been severed from employment for purposes of receiving a distribution under a plan. Plans that permit such distributions must be amended to prohibit individuals who receive a distribution based upon this "deemed severance" from making any elective deferrals or employee contributions during the 6-month period beginning on the date of the distribution. This optional amendment may be adopted for plan years beginning after December 31, 2008.
- Effective for plan years beginning after December 31, 2008, plans may be amended to permit participants who are called to active duty for a minimum 180-day period or for an indefinite period to receive a "qualified reservist distribution" which is exempt from the 10% penalty on early distributions and which can be repaid over a two-year period beginning after the participant's active duty ends. This optional amendment may be adopted for plan years beginning after December 31, 2008.
Worker, Retiree, and Employer Recovery Act of 2009
Effective for plan years beginning after December 31, 2009, plans allowing eligible rollover distributions must allow nonspouse beneficiaries to roll over the deceased employee's proceeds into an IRA. This mandatory amendment must be adopted no later than the plan sponsor's due date for its 2010 federal income tax return.
Emergency Economic Stabilization Act of 2008
- Effective October 3, 2008, plans were permitted to make distributions and loans to victims of 2008 mid-western storms. This optional amendment must be made on or before December 31, 2010.
Small Business Jobs Act of 2010
Effective September 27, 2010, the Small Business Jobs Act of 2010 permits, but does not require, plans to offer in-plan Roth conversions. Plan sponsors who choose to offer this feature must amend their plan documents to permit in-plan Roth conversions and, if the plan does not already provide for a Roth feature, amend the plan to add the Roth feature. Plan sponsors should await further guidance which is anticipated from the IRS before making these amendments.