MAP-21 “Pension Smoothing” Provisions Extended / January 31, 2015 Submission Deadline for IRS Determination Letter Applications for Multiemployer Plans and Other Cycle D Filers

On August 8, President Obama signed legislation that extends certain “pension smoothing” provisions in the Moving Ahead for Progress in the 21st Century (MAP-21) Act that was signed in 2012. This pension funding relief will continue to allow plan sponsors to make lower contributions to their single-employer defined benefit plans in upcoming years by delaying the phase out of MAP-21 until 2017.

MAP-21 effectively increases the discount rate that plan sponsors can use to estimate their pension funding obligations. The extension of MAP-21 is generally seen as a welcome development by plan sponsors who have had to make higher required contributions to their defined benefit plans in recent years due to historically low interest rates.

January 31, 2015 Submission Deadline for IRS Determination Letter Applications for Multiemployer Plans and Other Cycle D Filers

Employers that sponsor individually designed retirement plans and multiemployer plans in Cycle D should begin preparing their plans for submission to the IRS determination letter program. The IRS determination letter program gives plan sponsors who apply for and receive a favorable determination letter assurance that their plan document complies in form with applicable IRS requirements. Cycle D filers—meaning plan sponsors with employer identification numbers ending in “4” or “9”, and multiemployer plans—may submit applications to the IRS through the end of January 2015 in order to remain on-cycle as set forth under Internal Revenue Bulletin 2007-44. Plan sponsors who rely on pre-approved volume submitter or master and prototype plan documents generally will not need to submit their plans to the IRS for determination.

To prepare a submission under this program, plan sponsors should review the 2013 Cumulative List of Changes in Plan Qualification Requirements (IRS Notice 2013-7) to ensure that all required amendments have been adopted. Plan sponsors will then need to restate their plan documents to incorporate all amendments adopted by the employer prior to January 31, 2015. The process also requires the plan sponsor to complete a number of IRS forms that will accompany the submission.

Preparing a determination letter submission to the IRS can be a time consuming process. Plan sponsors would be wise to get a head start by preparing their plan documents and associated IRS forms well in advance of the deadline to ensure that the process goes smoothly.

Source: Franczek Radelet