<nobr>Dec 21, 2007</nobr>

ERIC Submits Comments to IRS on Benefit Restrictions for Underfunded Pension Plans

ERIC December 21 submitted to the Internal Revenue Service comments on proposed regulations regarding the prefunding balance and the funding standard carryover balance under section 430(f) of the Internal Revenue Code, and the limits imposed by section 436 on the accrual and payment of benefits under defined benefit plans. Sections 430(f) and 436 were added to the tax code by the Pension Protection Act of 2006.

Section 436 restricts plan features and benefits based upon the plan's adjusted funding target attainment percentage (AFTAP). If a plan's AFTAP is below 80 percent, a plan may not make an amendment that would increase accrued benefits due under the plan. The restriction would also apply if the plan amendment would cause the plan's AFTAP to fall below 80 percent. If a plan's AFTAP is less than 80 percent but greater than 60 percent, section 436 limits the size of accelerated payments (such as lump sums). Plans with an AFTAP of less than 60 percent would be prevented from making accelerated payments and would cease benefit accruals for participants.

The proposed regulations were published in the Federal Register on August 31, 2007.

The comments discuss how ERIC member are extremely concerned about the proposed regulations. The comments generally fall into the following categories:

• Discrepancies Between Statutory and Regulatory Requirements


• Unreasonable and Uncertain Administrative Requirements


• Limitations on Benefit Increases Required By Existing Plan Provisions

ERIC Comments

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