The deadline for certain required plan amendments has been extended. On December 11, 2009, the IRS issued Notice 2009-97 to give plan sponsors additional time to adopt plan amendments for certain requirements of the Internal Revenue Code (Code) added by the Pension Protection Act of 2006 and subsequently modified by the Worker, Retiree, and Employer Recovery Act of 2008. The deadline is extended to the last day of the first plan year that begins on or after January 1, 2010. Operational compliance is required during the extension period. The extension applies to:

  • Funding-based limits on benefits and benefit accruals under Code Sections 401(a)(29) and 436 for single employer defined benefit plans
  • Vesting and other special rules for cash balance and other Code Section 411(a)(13)(C) defined benefit plans to meet Code Section 411(a)(13) and Code Section 411(b)(5) requirements
  • Defined contribution diversification requirements under Code Section 401(a)(35)(E)

Most plan sponsors did not wait until December to adopt amendments required to be adopted by the last day of that month, so many employers adopted a good-faith version of these amendments before the extension was granted. Such good faith amendments should be sufficient in most instances until the plan's request for its next IRS determination letter, at which time refinements based on final rules and guidance may be agreed upon.

Plan distributions to nonspouse beneficiaries become subject to most of the same rules that apply to other eligible rollover distributions for plan years beginning after December 31, 2009. Beginning with the plan year commencing in 2010, plan administrators are required to give all nonspouse beneficiaries of deceased plan participants a written notice explaining the direct rollover rules and the mandatory 20-percent income tax withholding rules for distributions made to them that are not directly rolled over. Samples of the written tax notice are provided in IRS Notice 2009-68. (This treatment was optional prior to 2010.)