In Notice 2011-3, the IRS provided guidance on special rules relating to funding relief for single employer defined benefit pension plans (including multiple employer defined benefit pension plans) under the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PRA). The guidance is split into ten sections in a question and answer format. A few notable topics are:
One of the two alternative amortization schedules can be elected by a plan sponsor for one or two of the plan years beginning in 2008, 2009, 2010 or 2011, as long as the deadline for the minimum required contribution for the plan year occurs on or after June 25, 2010.
Plan sponsors can elect to apply one of two alternative amortization schedules to the shortfall amortization base—either the 2-plus-7-year amortization schedule or the 15-year amortization schedule. The notice further provides how installment amounts for a shortfall amortization base are calculated under each schedule.
Elections to Use An Alternative Amortization Schedule
A plan sponsor's election of an alternative amortization schedule after January 1, 2011, must be made by providing written notification of such election to both the plan's enrolled actuary and the plan administrator. The election must be signed and dated by the plan sponsor and include basic identification information for the plan, the election information, and a statement that the plan sponsor will notify the PBGC and plan participants and beneficiaries.
The election must be made by the latest of (a) the last day of the plan year for which the election is made, (b) 30 days after the valuation date for the plan year for which the election is made, or (c) January 31, 2011.
Notification to Participants, Beneficiaries and the PBGC
Plan sponsors that elect funding relief are required to give notice of the election to the participants and beneficiaries of the plan as well as to the PBGC. Such notice must be provided to participants and beneficiaries of the plan 120 days after the end of the plan year for which an alternative schedule is elected, or by May 2, 2011, if later. If the election for a plan is made simultaneously for two plan years, the notice for both elections can be combined as long as the notice identifies both years for which the election is made. The notice requirements and a model notice are provided in Notice 2011-3.
The PBGC must be notified by the later of (a) 30 days after the date the election is made or (b) January 31, 2011.
Plan sponsors who elected an alternative amortization schedule for the 2008 or 2009 plan years do not need to file an amended Form 5500 with a revised Schedule SB. However, the Schedule SB filed for subsequent plan years must accurately state any election.
Additional topics addressed in the Notice include installment acceleration amounts, excess compensation amounts, excess shareholder payment amounts, eligible charity plans, and transition rules.