2008 Cumulative List

The 2008 List of Cumulative Changes for Cycle D plans has been issued as IRS Notice 2008-108.

This cumulative list is for Cycle D. Cycle D is for individually designed plans whose EIN ends with a 4 or a 9. Cycle D is also for Multiemployer plans. Cycle D starts February 1, 2009 and ends January 31, 2010.

Once again the IRS has listed as “new”, items that appear for the first time.  As is our tradition since the cumulative lists began in 2004, we will present only the new items in our web article and a link to the entire cumulative list.

The Service will not consider in its review of any determination letter application, for the submission period that begins February 1, 2009, any:
1. guidance issued after October 1, 2008;
2. statutes enacted after October 1, 2008;
3. qualification requirements first effective in 2010 or later; or
4. statutory provisions that are first effective in 2009, for which there is no
guidance identified in this notice.

Terminating plans must include all law changes in effect at the time of termination.

Pension Protection Act (PPA) of 2006
The PPA ’06 provisions are now included in the Cumulative List of Changes in Plan Qualification Requirements. Plans submitted in Cycle D must be amended to include the applicable PPA
provisions listed in section VI of this notice. Thus, all plans submitted will receive a determination letter which covers PPA ’06, even if the deadline amending under section 1107 of PPA ’06 is after January 31, 2010.

As an alternative to submitting a plan in Cycle D, a plan sponsor of a Cycle D plan whose first plan year beginning on or after January 1, 2009 ends on or after February 1, 2010, may defer submission of its plan until Cycle E (February 1, 2010 – January 31, 2011). In order to defer submission of such a plan until Cycle E, an application must be timely filed in Cycle E. In such a case, the plan will be treated as having been filed within the plan’s EGTRRA remedial
amendment period and will be reviewed on the basis of the 2009 Cumulative List. However, such a plan will be treated as a Cycle E plan solely for this initial cycle, and all subsequent submissions will be made in Cycle D.

Heroes Earnings Assistance and Relief Tax Act (HEART) of 2008
Plans submitted in Cycle D can be amended, at the option of plan sponsors, to include the applicable HEART Act provisions. However, the Service will not consider the HEART Act in issuing determination letters for Cycle D plans, and such letters cannot be relied on with respect to the
requirements of the HEART Act. The extension of the qualified reservist distribution will be considered a PPA provision.

New Requirements for Cycle D

401(a)
Rev. Rul. 2008-40, 2008-30 I.R.B. 166, provides that the transfer of amounts from a trust under a plan qualified under §401(a) to a nonqualified foreign trust is treated as a distribution from the transferor plan and that transfer of assets and liabilities from a qualified plan to a plan that satisfies §1165 of the Puerto Rico Code is also treated as distribution from the transferor plan.

Rev. Rul. 2008-45, 2008-34 I.R.B. 403, provides that the exclusive benefit rule of §401(a) is violated if the sponsorship of a qualified retirement plan is transferred from an employer to an unrelated taxpayer and the transfer is not in connection with a transfer of business assets or operations from the employer to the unrelated taxpayer.

401(a)(5)
Code section 401(a)(5)(G) amended by PPA §861(a)(1) with respect to governmental plans.

401(a)(26)
Code section 401(a)(26)(G) amended by PPA §861(a)(1) with respect to governmental plans.

401(a)(35)
PPA §901(a)(1) added §401(a)(35) requiring that defined contribution plans provide employees with the freedom to divest publicly traded securities.
N. 2006-107, 2006-2 C.B. 1114. N. 2008-7, 2008-3 I.R.B. 276, extends certain transitional guidance and transitional relief provided to certain defined contribution plans holding publicly traded employer securities under N. 2006-107.

401(a)(36)
PPA §905(b) added §401(a)(36) regarding distributions to a participant who has attained age 62 and who has not separated from employment at the time of the distribution.

401(k) and (m)
> PPA §826 modified the rules relating to distributions from a §401(k) plan, participant hardship may be based on participant’s beneficiary under the plan the same as the participant’s spouse or dependent.
N. 2007-7, 2007-1 C.B. 395, provides guidance regarding PPA ’06 §826. Announce. 2007-59, 2007-1 C.B. 1448, provides that a plan will not fail to satisfy the requirements of a §401(k) safe harbor plan because of a mid-year change to implement the PPA §826 hardship withdrawals.

>PPA §827 added §401(k)(2)(B)(i)(V) which permits reservists called to active duty after September 11, 2001 and before 2008 to take in-service distributions from a §401(k) plan.

> PPA §861(a)(2) amended §401(k)(3)(G) with respect to governmental plans.

> PPA §902(e)(3) eliminates gap period income rule for excess contributions in §401(k)(8)(A)(i).

>PPA §902 added §401(k)(13) with respect to qualified automatic contribution arrangements.

> PPA §902(e)(3) eliminates gap period income rule for excess aggregate contributions in §401(m)(6)(A).

>PPA §902 added §401(m)(12) with respect to qualified automatic contribution arrangements

402(c)(2)(A)
PPA §822(a) amended §402(c)(2)(A) to permit nontaxable distributions from a qualified plan to be directly rolled over taxfree to either another qualified plan or a §403(b) plan if the separate accounting requirements are met.

402(c)(11)
PPA §829(a)(1) added §402(c)(11) to allow nonspouse beneficiaries to directly roll over distributions from a qualified plan to an individual retirement plan.
> N. 2007-7, 2007-1 C.B. 395, provides guidance regarding §402(c)(11).

402(f)
PPA §1102(a) provides that notice required to be provided under §402(f) may be provided as much as 180 days before the annuity starting date. N. 2007-7, 2007-1 C.B. 395, provides guidance regarding PPA §1102.

408(A)(e)
PPA §824 added §408A(e) which permits rollovers to Roth IRAs from accounts that are not designated Roth accounts that are part of qualified plans, §403(b) plans, and §457 plans.
N. 2008-30, 2008-12 I.R.B. 637, provides guidance regarding PPA §824.

411(a)
Section 411(a) of the Code was amended by §904 of PPA to provide for faster vesting of employer nonelective contributions. N. 2007-7, 2007-1 C.B. 395, provides guidance regarding §411(a), as amended by § 904 of PPA ’06.

411(a)(11)
PPA §1102(a) provides that notice required to be provided under §411(a)(11) may be provided as much as 180 days before the annuity starting date. Section 1102(b) of PPA provides that the notice under §411(a)(11) also include a description of the
consequences of failing to defer receipt of a distribution. N. 2007-7, 2007-1 C.B. 395, provides guidance regarding PPA §1102.

411(a)(13)
PPA §701(b)(2) added § 411(a)(13) with respect to special vesting rules for applicable defined benefit plans, such as cash balance plans. N. 2007-6, 2007-1 C.B. 272, provides guidance regarding cash balance plans and other hybrid defined benefit plans.

411(b)(1)
Rev. Rul. 2008-7, 2008-7 I.R.B. 419, addresses (1) the application of the backloading provisions of §411(b)(1)(A), (B), and (C) to defined benefit cash balance plans and (2) the use of a “greater of” formula in the instance of a conversion of a defined benefit pension plan to a cash balance plan, including limited § 7805(b) relief.

411(b)(5)
PPA §701(b)(1) added §411(b)(5) with respect to applicable defined benefit plans, such as cash balance plans, and special rules relating to age. N. 2007-6, 2007-1 C.B. 272, provides guidance regarding cash balance plans and other hybrid defined benefit plans.

414(d)
PPA §906(a)(1) added language to the definition of governmental plan in §414(d) with respect to Indian tribal governments.
> N. 2006-89, 2006-2 C.B. 772, provides transition relief for plans subject to PPA §906.
> N. 2007-67, 2007-2 C.B. 467, extends the transition relief provided in N. 2006-89.

414(f)(6)
PPA §1106(b) added §414(f)(6) with respect to a multiemployer status election. Section 6611(a)(2) and (b)(2) of the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq
Accountability Appropriations Act, 2007 amends §414(f)(6).

414(w)
PPA §902(d)(1) added §414(w) with respect to eligible automatic contribution arrangements.

415
Section 415(b)(2)(E)(ii) of the Code was amended by §303 of PPA regarding the interest rate assumption for applying benefit limitations to lump sum distributions.
> Final Regulations under §415 were published April 5, 2007 (72 Fed. Reg. 16878), which provides guidance regarding §415(b)(2)(E)(ii), as amended by PPA.
> PPA §832(a) amended §415(b)(3) to eliminate the active participant restriction from the “average compensation for high 3 years” definition.
> PPA §906(b)(1)(A) & (B) modified §§415(b)(2)(H) and 415(b)(10), respectively, regarding Indian tribal governments.
> PPA §867(a) removed the 100% of compensation limitation for a church plan participant if the participant has never been a highly compensated employee of the church in §415(b)(11). Final Regulations under §415 were published April 5, 2007 (72 Fed. Reg. 16878), which provide guidance regarding §415(b)(11), as added by PPA.

416
> PPA §902(c)(1) amended §416(g)(4)(H)(i) by inserting §401(k)(13) of the Code.
> PPA §902(c)(2) amended §416(g)(4)(H)(ii) by inserting §401(m)(12) of the Code.

417
PPA §1102(a) provides that notice required to be provided under §417 may be provided as much as 180 days before the annuity starting date. N. 2007-7, 2007-1 C.B. 395, provides guidance regarding PPA ’06 §1102.

> PPA §302(b) amended the applicable interest rate and mortality table to be used for determining the present value of lump sum distributions in §417(e)(3). Rev. Rul. 2007-67, 2007-2 C.B. 1047, addresses the mortality tables required by §417(e)(3). N. 2008-30, 2008-12 I.R.B. 637, provides guidance regarding PPA §302.

• > PPA §1004(a) added the qualified optional survivor annuity benefit to §417. N. 2008-30, 2008-12 I.R.B. 637, provides guidance regarding PPA §1004.

432(e)
PPA §212(a) added §432(e) which requires that a rehabilitation plan be adopted for multiemployer plans in critical status and permits certain reductions and adjustable benefits.

Miscellaneous
> N. 2008-21, 2008-7 I.R.B. 431, provides transitional guidance for 2008 under §436 for small plans with end-of-year valuation dates.

> N. 2008-73, 2008-38 I.R.B. 717, expands transition relief of Notice 2008-21.

HEART ACT
Plans submitting in Cycle D may be amended for the HEART Act, but the Service will not consider the HEART Act in issuing determination letters. The HEART Act provisions are listed below.

401(a)(37)
Section 104(a) of the HEART Act added Code §401(a)(37) with respect to benefits payable on the death of a plan participant while performing qualified military service.

414(u)(9)
Section 104(b) of the HEART Act amended §414(u) of the Code by adding a paragraph regarding how a plan may provide benefit accruals for a person who dies or becomes disabled while performing qualified military service.

414(u)(12)
Section 105(b)(1) of the HEART Act added §414(u)(12) with respect to the treatment of differential wage payments during the period a person, while on active duty, is performing service in the uniformed services.