As we start a new year, plan sponsors and plan administrators should be aware of important upcoming changes affecting employee benefits in 2012. This Part I discusses changes impacting qualified plans, including recently released final 408(b)(2) regulations regarding fee disclosure requirements. Part II will discuss changes impacting health and welfare plans.
REMEMBER: The following amendments were due by December 31, 2011. If you are not sure as to whether these amendments have been adopted, please contact one of our benefits attorneys.
A. Required Minimum Distribution Suspension Amendment
The Worker, Retiree, and Employer Recovery Act (“WRERA”), enacted in 2008, and among its other provisions, waived required minimum distributions (“RMDs”) from defined contribution plans (i.e., 401(k) plans, ESOPs, profit sharing plans, etc.) for the 2009 calendar year. Employers/plan sponsors must have adopted this amendment by the last day of the 2011 plan year (i.e., December 31, 2011 for calendar year plans)
B. Code Section 436 Funding Based Restrictions on Defined Benefit Plans
Section 436 of the Internal Revenue Code (the “Code”) (added to the Code by the Pension Protection Act of 2006) imposes restrictions on benefit distributions and accruals for underfunded single-employer defined benefit plans. The restrictions that apply are determined by the plan’s Adjusted Funding Target Attainment Percentage (“AFTAP”). If a plan’s AFTAP is less than 80%, the plan cannot be amended to increase benefits. If a plan’s AFTAP is less than 80%, but at least 60%, the portion of benefit that may be paid in a single lump sum or other prohibited payment is limited. If the AFTAP is less than 60%, the plan may not pay any lump sum distribution or other accelerated payments. Employers/plan sponsors must have adopted this amendment by the last day of the 2011 plan year (i.e., December 31, 2011 for calendar year plans).
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