IRS official describes future guidance under Code Sec. 436

The IRS is currently working on several items of guidance relating to the plan funding rules under Code Sec. 436, Carolyn Zimmerman, actuary, IRS Employee Plans, Rulings & Agreements, said during a February 27, 2013 webcast hosted by the American Society of Pension Professionals & Actuaries (ASPPA). In particular, she stated that the IRS was working on proposed regulations that involve a review of the list of deemed immaterial changes for purposes of certifying a plan’s adjusted funding target attainment percentage (AFTAP).

“There may be some additional items on this list when the next round of regulations come out,” Zimmerman noted. Zimmerman also stated that the IRS’s next step may be to finalize proposed regulations issued in 2008 under Code Sec. 430(a) and (j). She declined, however, to commit to a particular time frame. “There is a lot of time involved when regulations are in clearance. Even when we’re done writing them, it takes a lot of time to get them through,” she said.


Zimmerman provided a brief update on the Employee Plans Compliance Resolution System (EPCRS) as it relates to Code Sec. 436 funding issues. The EPCRS was recently updated in Rev. Proc. 2013-12.

“This new revenue procedure for the first time contains some corrections for 436 issues,” Zimmerman said, adding that the IRS is continually gaining new experience on the types of errors plans are encountering that they would like to correct. An example of a correction in the event of a direct violation of a restriction, such as the payment of an unconditional contingent event benefit (UCEB) when the AFTAP was less than 60%, was provided by Zimmerman. She stated that, in such a case, Rev. Proc. 2013-12 provides that an employer could correct through either of two ways: (1) The employer could make the Code Sec. 436 contribution to the plan that it would have made originally, plus interest, through the EPCRS or (2) The employer could use the overpayments rule that is used for payments that exceed the limits on benefits and contributions under Code Sec. 415.

Source: American Society of Pension Professionals & Actuaries (ASPPA) webcast, February 27, 2013.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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