Nov 30, 2011

IRS Issues Sample Plan Amendment and Extends Deadline for Compliance with Section 436

On November 29, 2011, the IRS issued a sample plan amendment to comply with Code Section 436. The sample plan amendment was included with Notice 2011-96. The Notice also extended the deadline for adoption of the interim amendment necessary to comply with Code Section 436.

Code Section 436 was added by the Pension Protection Act of 2006, establishing a series of limitations for benefit accruals and benefit payments for underfunded defined benefit plans. The limitations imposed by Code Section 436 on underfunded defined benefit plans are based on the level of a Plan’s underfunding. Plans with less than 60 percent funding must cease benefit accruals and may not make single sum distributions as well as certain other types of benefit payments. Plans funded at less than 80 percent, but not less than 60 percent, are prohibited from making single sum and certain other payments.

The deadline for adopting the interim amendment is:

  • the last day of the first plan year that begins on or after January 1, 2012;
  • the last day of the plan year for which Section 436 is first effective for the plan; or
  • the due date, including extensions, of the employer’s tax return for the tax year that contains the first day of the plan year for which Section 436 is first effective for the plan.

The sample amendment may be adopted for individually-designed plans, as well as by sponsors of pre-approved prototype and volume submitter plans. As long as the sample amendment is adopted by the deadline, the plan can rely on the amendment to satisfy the requirements of Code Section 436 and satisfy the anti-cutback provisions of Code Section 411(d)(6).

For more information on the sample plan amendment, contact your SGR Executive Compensation and Employee Benefits counsel.


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