TaxNewsFlash-Exempt Organizations

March 24, 2008
No. 2008-26

Proposed Timing Rules for Providing Notice of Plan Amendments That Would Significantly Reduce Future Benefit Accruals

The Treasury Department and IRS on March 20, 2008 released for publication in the Federal Register proposed regulations (REG-110136-07) that would provide timing rules for providing notice to plan participants when a plan amendment would significantly reduce future benefit accruals.

For a computer-scanned version of the regulations (15 pages): REG-110136-07

Summary

Section 411(d)(6)(A) protects retirement plan benefits by providing that a plan generally cannot decrease the accrued benefit of a participate by an amendment to the plan. There are certain exceptions to this general rule.

If an exception applies, section 4980F imposes an excise tax when a plan administrator fails to provide timely notice of a plan amendment that provides for a significant reduction in the rate of future benefit accrual—for example, the elimination or reduction of an early retirement benefit or retirement-type subsidy.

The proposed regulations provide the timing rules for providing notice to a plan participant of a plan amendment that is permitted to be effective before the amendment date. The regulations also propose rules for providing notice relating to plan amendments affecting benefits for prior service, and guidance relating to the special funding rules added by the Pension Protection Act of 2006 is also provided.

The regulations are proposed to be applicable to amendments that are effective on or after January 1, 2008; however, for certain other amendments, the proposed regulations are applicable on or after July 1, 2008.

A public hearing on these proposed regulations has been set for July 10, 2008. Comments and outlines of topics to be addressed at the public hearing must be received by June 20, 2008.

REG-110136-07 will appear in the Federal Register on Friday, March 21, 2008.

For more information, contact Rick Speizman, National Partner-In-Charge, KPMG’s Exempt Organizations Tax Practice (ExoTax), at (202) 533-3084 or rspeizma@kpmg.com

To print a copy of this TaxNewsFlash article, go to: File>Print>Preferences or Properties>Landscape.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in TaxNewsFlash-Exempt Organizations is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to US-KPMGWNT@kpmg.com. For more information, contact KPMG’s Federal Tax Legislative and Regulatory Services Group at + 1 202.533.4366, 2001 M Street NW, Washington, DC 20036-3310.

To unsubscribe from TaxNewsFlash-Exempt Organizations, reply to US-KPMGWNT@kpmg.com and type ‘Exempt Organizations: Unsubscribe' in the subject line, then click on the SEND button.

Privacy | Legal