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Application of Nondiscrimination Rules to Fully Insured Health Plans Delayed

Under healthcare reform, as originally enacted, non-grandfathered fully-insured group health plans are subject to the nondiscrimination requirements of the Internal Revenue Code, effective for the first plan year beginning on or after September 23, 2010. In order to provide fully-insured group health plan sponsors with time to implement the required changes, the Departments of Treasury, Labor and Health and Human Services have delayed the effective date of compliance until after more specific guidance is issued. The announcement of the delayed effective date is available here.

PBGC Guidance Regarding the Reportable Events Regulation

For purposes of the funding-related determinations used in the waivers, extensions, and advance reporting threshold tests in the reportable events regulation, the PBGC announced that a plan’s unfunded vested benefits and the value of its assets and vested benefits are determined for a plan year beginning in 2011 in the same manner as for variable-rate premiums for the preceding plan year. The PBGC also announced that for purposes of the reportable events regulation, if a required quarterly contribution for the 2011 plan year is not timely made to a plan, and financial inability to make the contribution is not the reason for not making the contribution, the reporting requirement (1) is waived if the plan has fewer than 25 participants for the prior plan year and (2) if the plan has at least 25 but fewer than 100 participants for the prior plan year, will be considered satisfied if a… Continue Reading

Additional Relief for Correction of 409A Operational and Document Failures

The IRS issued additional relief allowing nonqualified deferred compensation plans to correct operational and document failures to comply with Internal Revenue Code section 409A. With respect to correction of plan document failures, the additional relief provides: (1) that the types of plans eligible for relief include (a) a nonqualified plan linked to a qualified plan or another nonqualified plan, provided that the linkage does not affect the time and form of payments under the plans and (b) certain stock rights (stock options and stock appreciation rights) that were intended to be subject to, and compliant with, 409A but that have a plan document failure; (2) an additional method of correction for certain failures involving payments at separation from service subject to the requirement to submit a release of claims or similar document, and transition relief through December 31, 2012 to correct such failures that were in effect on or before… Continue Reading

Plan Amendment Deadline Extended for Defined Benefit Plans

The deadline for defined benefit plans to adopt interim or discretionary plan amendments to comply with certain requirements under the Pension Protection Act and subsequent guidance is extended to the last day of the first plan year that begins on or after January 1, 2011. The extension applies to the following requirements: (1) funding-based limits on benefits and benefit accruals, applicable to single-employer defined benefit plans and (2) with respect to cash balance and certain other defined benefit plans, (a) 100% vesting of employer-derived benefits upon completion of three years of service and (b) compliance with special rules regarding the prohibition on ceasing benefit accruals or reducing accrual rates based on age. Notice 2010-77 can be found here.

December 2010