<nobr>Nov 10, 2009</nobr>

IRS Provides Relief for Hybrid Plan Sponsors Under Forthcoming Cash Balance Regulations

The Treasury Department and Internal Revenue Service on November 10 released Announcement 2009-82 providing relief for sponsors of statutory hybrid plans that must amend the interest crediting rate in those plans under forthcoming cash balance regulations.

Announcement 2009-82 states that the regulations specifying the permissible market rate of return are not expected to go into effect before the first plan year that begins on or after January 1, 2011.

With respect to the section 411(d)(6) issue related to these regulations, the announcement states that a special timing rule for providing section 204(h) notices will go into effect. Specifically, any 204(h) notice related to a plan amendment needed to change a plan's interest crediting rate will be permitted to be provided as late as 30 days after the effective date of the amendment.

This relief will apply to an amendment only if the amendment is effective no later than the first day of the first plan year that begins on or after January 1, 2010 (therefore, plans effectively have until January 30, 2010 to provide an applicable section 204(h) notice).

Announcement 2009-82 also states that an amendment to a plan to adjust the interest crediting rate (as a result of the final regulations on market rate of return) will not violate section 411(d)(6) merely because it reduces the future interest crediting rate on participant's account balances to the extent necessary to constitute a permissible rate under those final regulations.

Questions or comments on the guidance should be addressed to Kathryn Ricard (kricard@eric.org).

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Websites:

Announcement 2009-82

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