IRS Provides Form 5500 Guidance for Plans Seeking Special Funding Relief

The Internal Revenue Service (IRS) has issued two notices explaining that sponsors of single- and multi-employer defined pension plans can still elect funding relief provided by the newly-enacted Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act (“PRA 2010”) (P.L. 111-192) even if they have already filed Form 5500 to satisfy their annual reporting requirements. This Act, which was signed into law on June 25, includes single-employer pension plan funding relief measures such as an extended period for single employer defined benefit plans to amortize certain shortfall amortization bases; application of an extended amortization period to plans subject to prior law funding rules; a lookback for certain benefit restrictions; and a lookback for the credit balance rule for plans maintained by charities. Multi-employer plan funding relief measures included in the PRA 2010 include adjustments to funding standard account rules, such as expanded “smoothing” periods for losses incurred during the period of economic decline; and modification of certain amortization extensions under prior law, among other provisions.

The IRS Notices 2010-55 (pdf) and 2010-56 (pdf) explain that plan sponsors should meet their deadlines for filing Form 5500 (and Schedule SM or MB) for the plan year, taking into account the rules for obtaining an extension. The agency notes that it will issue future guidance on the special funding rules, particularly how a sponsor can avail itself of the funding relief when it has already filed the Form 5500 for the plan year. With respect to single-employer plans, this future guidance may also address the following topics:

• calculation of the alternative amortization schedules permitted under PRA 2010 (and the effect on funding balances);
• the rules relating to making accelerated contributions to plans;
• the procedures for making the election to use an alternative amortization schedule; and
• the notice requirements for plan participants, beneficiaries, and the Pension Benefits Guarantee Corporation (PBGC).

If a plan year ends before the guidance is issued, the plan sponsor will be allowed to elect to use an alternative amortization schedule under PRA 2010 without regard to whether the Form 5500 (and Schedule SB) has been filed for that plan year.

With respect to multi-employer plans, guidance may cover:

• determination of the portion of the experience loss or gain attributable to net investment losses incurred in either or both of the first two plan years ending after August 31, 2008;
• the requirement under tax code section 431(b)(8)(E) to notify participants and beneficiaries of application of the special rules; and
• the effect of application of the special rules on the certification of a multiemployer plan’s status (i.e., endangered, critical or neither) under section 432(b), including certifications already made.