On November 29, 2011, the IRS issued Notice 2011-96 (the Notice) extending both the deadline to amend a plan to satisfy Code section 436 and the period during which such an amendment is eligible for relief from the anti-cutback requirements of Code section 411(d)(6). In addition, the Notice includes a sample plan amendment that plan sponsors may use in amending plans to satisfy Code section 436.
Code section 436 as added by the Pension Protection Act of 2006 sets limits on benefit payments and pension accruals for defined benefit plans that are "underfunded." The effective date of Code section 436 was generally January 1, 2008. Pursuant to the Notice, the deadline for adopting an interim amendment with respect to Code section 436 has been extended to the latest of: (1) the last day of the first plan year that begins on or after January 1, 2012, (2) the last day of the plan year for which Code section 436 is first effective for the plan or (3) the due date (including extensions) of the employerʼs tax return for the tax year that contains the first day of the plan year for which Code section 436 is first effective for the plan. However, in the case of an application for a determination letter for an individually designed plan that is filed on or after February 1, 2012, the restated plan that is submitted with the application must incorporate an interim amendment with respect to Code section 436. Therefore, the filing of the application will accelerate the interim amendment deadline for Code section 436. The deadline to adopt amendments for compliance with Code section 436 may be later for plans subject to collective bargaining agreements and plans sponsored by certain tax-exempt organizations.
Furthermore, the Notice provides that a plan amendment adopted with respect to Code section 436 that eliminates or reduces a Code section 411(d)(6) protected benefit does not cause a plan to fail to meet the anti-cutback requirements of Code section 411(d)(6) if the amendment is adopted by the extended deadline and the elimination or reduction is made only to the extent necessary to enable the plan to meet the requirements of Code section 436. Adoption of the sample amendment by the extended deadline will be deemed to have satisfied this condition.