What Changes Do Pension Plans Need by Year-end?

Darlene Finzer | November 29th, 2012

In the midst of the publicity surrounding the new ERISA fee disclosures requirements, it is important not to lose sight of the fact that other recently enacted legislation may impact your retirement plan.  Changes to IRS regulations may require plan’s to adopt amendments before the end of the year. 

Extended Plan Diversification Regulations

Employee Stock Ownership Plans (ESOPs) have historically been required to offer diversification rights to participants with accounts holding employer stock.  The Pension Protection Act of 2006 (PPA) generally extended  the participant diversification rights to defined contribution plans (not just ESOPs) holding  publicly traded stock where any portion of employee contributions, elective deferrals, or employer contributions are invested in employer stock that is readily tradable on an established securities market.  The recent guidance in IRS Notice 2011-19 identifies when securities are considered “readily tradable on an established securities market,” thus requiring the diversification rights under the plan.  In order to remain compliant, plans may need to adopt amendments reflecting this guidance.

Benefit Limitation Regulations

Because of the overall economic performance, certain underfunded, single employer defined benefit plans have become subjected to limitations on the accrual and payment of benefits.  Under the revenue procedures, the occurrence of a statutory or regulatory change to qualification requirements that will impact plan provisions (as occurred with these underfunded plans), an “interim amendment” is required to be adopted in response to the accrual and payment limitations imposed.   The IRS has provided a sample plan amendment to address these certain benefit limitations applied to such plans.  The amendment under IRS Notice 2011-96 is designed to avoid the effect of a plan provision that would otherwise result in disqualification of the plan (because of the limitations placed on the benefits.)

Ohio Retirement Plan Help

With all the changes to pension regulations in the last year, 2012’s been a busy year for plan fiduciaries.  Not sure if your plan’s kept up with all the changes?  Consult your plan advisor or contact Rea & Associates.  Our retirement plan services team will help you to ensure that all required amendments are executed prior to the end of the year – to keep the regulators, and if applicable, your plan auditor, happy.

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