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Pension News in 2009

The following list tracks important guidance that was released in 2009. These items are summarized in detail, with appropriate commentary, in our quarterly newsletter, eRISA Update. See our Newsletters page to sign up for eRISA Update.

Legislative Developments

  • No entries

Treasury Regulations

  • Final regulations on eligible automatic contribution arrangements (EACAs); permissible withdrawals under IRC §414(w) [Citation: Treas. Reg. §§1.414(w)-1, 1.402(c)-2, Q&A-4(h), 54.4979-1(c), 74 F.R. 8200 (February 24, 2009)]
  • Final regulations on qualified automatic contribution arrangements (QACAs) [Citation: Prop. Treas. Reg. §1.401(k)-3(a), (e), (h), (j) and (k), 74 F.R. 8200 (February 24, 2009)]
  • Proposed regulations permit a company to suspend or reduce the safe harbor nonelective contribution before the end of the year if the company incurs a substantial business hardship [Citation: Prop. Treas. Reg. §§1.401(k)-3(g) and 1.401(m)-3(h) (May 18, 2009)]
  • Regulations implement PPA 2006 provision for good faith standard to apply to governmental plans [Citation: Treas. Reg. §§1.401(a)(9)-1, Q&A-2(d), 1.401(a)(9)-6, 1.403(b)-8(e)(2) and (e)(8), 74F.R. 45993 (September 8, 2009)]
  • Additional guidance on comparability requirement for HSA contributions; special rule for testing contributions made for nonhighly compensated employees; guidance on paying excise tax [Citation: Treas. Reg. §§54.4980G-1, 54.4980G-3, 54.4980G-4, 54.4980G-6, 54.5980G-7, 54.6011-2, 54.6061-1, 54.6071-1, 54.6091-1, 54.6151-1, 74 F.R. 45994 (September 8, 2009)
  • Proposed regulations would update standards for enrolled actuaries to reflect changes in the law and industry practice [Citation: 20 C.F.R. Part 201, Prop. Reg. §§901.0, 901.1, 901.10-901.12, 901.20, 901.31, 901.32, 901.47 and 901.72, 74 F.R. 48030 (September 21, 2009)
  • Final regulations on calculation of funding target, target normal cost, interest rates, valuation of assets, use of funding balances, and at-risk plans [Citation: Treas. §§1.430(d)-1, 1.430(f)-1, 1.430(g)-1, 1.430(h)(2)-1, and 1.430(i)-1, 74 F.R. 53004 (October 15, 2009)]
  • Final regulations provide guidance on restrictions under IRC §436 [Citation: Treas. Reg. §1.436-1, 74 F.R. 53004 (October 15, 2009)
  • Regulations clarify notice requirements for retroactive amendments, treat certain notice requirements in other tax code and ERISA sections as satisfying 204(h) notice [Citation: Treas. Reg. §§1.411(d)-3 and 54.4980F-1, Q&As-1, -7 -8, -9, -10, -11 and -18, 74 F.R. 61270 (November 24, 2009)]

IRS Guidance

  • Annual update of determination letter procedure for 2009 [Citation: Rev. Proc. 2009-6, 2009-1 I.R.B. (January 5, 2009)]
  • 403(b) plan document requirement - deadline for compliance is postponed for a year [Citation: Notice 2009-3, 2009-2 I.R.B. (January 12, 2009)]
  • Guidance under the preparer penalty modification in the Tax Extenders and Alternative Minimum Tax Relief Act of 2008; tax returns subject to IRC §6694 penalty [Citation: Notice 2009-5, 2009-3 I.R.B. (January 19, 2009); Rev. Proc. 2009-11, 2009-3 I.R.B. (January 19, 2009)]
  • IRA reporting requirements with respect to waiver of 2009 minimum distribution requirement [Citation: Notice 2009-9, 2009-5 I.R.B. (February 2, 2009)]
  • Interim guidance under new IRC §457A pertaining to special income tax inclusion rule for nonqualified deferred compensation from certain "tax indifferent" parties [Citation: Notice 2009-8, 2009-5 I.R.B. (February 2, 2009)]
  • Notice 2009-22 provides interim rules regarding asset valuation methods that are permitted to be used by single employer defined benefit pension plans for minimum funding purposes pursuant to changes made by the Worker, Retiree, and Employer Recovery Act of 2008, Public Law 110-458 (WRERA). This notice also provides automatic approval for a change in asset valuation method for plan years beginning during 2009 to adopt any permissible asset valuation method. [Citation: Notice 2009-22, 2009-14 I.R.B. (April 3, 2009; advance release on March 16, 2009)
  • IRS proposed procedure to establish a prototype program for section 403(b) plans [Citation: Announcement 2009-34]
  • Acquisition of equity by Treasury Department pursuant to Emergency Economic Stabilization Act is not a permissible IRC §409A payment event [Citation: Notice 2009-49]
  • IRS solicits comments from public on issues that should be addressed in IRC §414(x) guidance [Citation: Notice 2009-71, 2009-35 I.R.B. (August 31, 2009)
  • Modifications to remedial amendment cycle applicable to governmental plans [Citation: Rev. Proc. 2009-36, 2009-35 I.R.B. (August 31, 2009)
  • Guidance on automatic contribution increases under an automatic contribution arrangement; sample plan language provided [Citation: Rev. Rul. 2009-30 and Notice 2009-65, 2009-39 I.R.B. (September 25, 2009)
  • Additional guidance on PPA amendment to allow non-Roth funds in eligible retirement plans to be rolled over to Roth IRAs [Citation: Notice 2009-75, 2009-39 I.R.B. (September 25, 2009)
  • IRS updates the model 204(f) notice to reflect law changes enacted since 2001 [Citation: Notice 2009-68, 2009-39 I.R.B. (September 25, 2009)
  • Ruling discusses tax treatment and qualification issues surrounding the deferral (either on an elective or nonelective basis) of the dollar equivalent of paid unused leave [Citation: Rev. Rul. 2009-31, Rev. Rul. 2009-32, 2009-39 I.R.B. (September 25, 2009)
  • IRS provides guidance to facilitate automatic enrollment in SIMPLE-IRA plans; publishes sample plan language [Citation: Notice 2009-66, Notice 2009-67, 2009-39 I.R.B. (September 25, 2009)]
  • IRS provides guidance on waiver of 2009 RMDs for defined contribution plans and IRAs [Citation: Notice 2009-82, 2009-41 I.R.B. (October 9, 2009)
  • Deemed distributions (or alternative special tax treatment) for certain individuals who relinquish U.S. citizenship or permanent U.S. residence for tax purposes [Citation: Notice 2009-85, 2009-45 I.R.B. (October 15, 2009)
  • Extended anti-cutback relief will be provided to statutory hybrid plans that need to be amended to comply with future guidance on market rate of interest [Citation: Announcement 2009-82, 2009-48 I.R.B. (November 30, 2009)
  • Retroactive remedial amendment period for section 403(b) plans [Citation: Announcement 2009-98]
  • 2009 list issued for Cycle E plans [Citation: Notice 2009-98, 2009-52 I.R.B. (December 11, 2009)]
  • Limited amendment extension to 2010 plan year for specific provisions of the PPA 2006; extension of anti-cutback relief for certain provisions [Citation: Notice 2009-97, 2009-52 I.R.B. (December 11, 2009)]

IRS Private Letter Rulings

  • No entries

DOL regulations

  • Assessment procedures for the ERISA §502(c)(4) penalty [Citation: DOL Reg. §2550.502c-4, 74 F.R. 17 (January 2, 2009)]
  • DOL withdraws final regulations prescribing requirements for statutory exemption under ERISA §408(b)(14) and IRC §4975(d)(17) with respect to investment advice rendered by a fiduciary adviser and incorporating class exemption that would have expanded scope of relief [Citation: Withdrawal of DOL Reg. §§2550.408g-1 and 2550.408g-2, 74 F.R. 60156 (November 20, 2009)]

DOL formal guidance (other than regulations)

  • Fiduciary duties with respect to losses on assets invested with Madoff [Citation: Statement of EBSA on the Duties of Fiduciaries In lIght of Recent Events Regarding Bernard L. Madoff Investment Securities LLC" (February 5, 2009), posted at]

PBGC regulations

  • The proposed regulations under ERISA §4010, which update the regulations to reflect the changes made by the PPA 2006, were finalized on March 16, 2009. [Citation: Prop. PBGC Reg. §§4010.1-4010.9, 4010.11-4010.13, 74 F.R. 11022 (March 16, 2009)] (Also see PBGC Technical Update 09-2, regarding an alternative form-of-payment assumption for determining benefit liabilities)
  • Regulations determine guaranteed benefits with respect to USERRA-covered participants who are in military service as of the termination date by including military service benefits that would be restored through the termination date if reemployment occurs after termination [Citation: PBGC Reg. §4022.11, 74 F.R. 59093 (November 17, 2009)]
  • Proposed regulations would update reportable event rules to reflect PPA 2006 funding rules and eliminate most automatic waivers and filing extensions [Citation: Prop. PBGC Reg. §§4043.1-4043.6, 4043.23, 4043.25-4043.27, 4043.29-4043.37, 4043.61-4043.70, 4043.81, 74 F.R. 61248 (November 23, 2009)]

PBGC formal guidance (other than regulations)

  • Reporting obligations for plans with Madoff-related losses [Citation: PBGC News Release No. 09-14, "Notice to DB Plans Concerning Funds Invested With Bernard L. Madoff Investment Securities LLC" (February 6, 2009), available at]
  • Reporting waived or subject to a simplified reporting option for certain small plans that have missed quarterly contribution not motivated by financial inability [Citation: PBGC Technical Update 09-3 (April 30, 2009), available at]
  • Extension of guidance in Technical Updates 09-1 and 09-3 to reportable events for the 2010 plan year [Citation: PBGC Technical Update 09-4 (November 23, 2009), available at]
  • PBGC requests comments on purchases of irrevocable commitments prior to standard termination [Citation: Request for Public Comment on the Purchase of Irrevocable Commitments Prior to Standard Termination, 74 F.R. 61074 (November 23, 2009)]

EBSA Advisory Opinions, Field Assistance Bulletins and other informal guidance

  • The DOL has provided interim guidance on the annual funding notices under ERISA §101(f) [Citation: Field Assistance Bulletin 2009-01 (February 10, 2009)]. The guidance includes model notices.
  • DOL posts FAQs at website regarding EFAST2 (mandatory electronic filing system) [Citation:]
  • DOL issues additional FAQs on revised Schedule C to Form 5500 [Citation: FAQs About The 2009 Form 5500 Schedule C, available at the DOL website (]
  • DOL provides reporting relief with respect to certain individually-owned contracts or custodial accounts held by section 403(b) plans [Citation: Field Assistance Bulletin (FAB) 2009-02, available at]
  • Prospectus delivery obligation under ERISA §404(c) regulations may be satisfied with a mutual fund's Summary Prospectus [Citation: Field Assistance Bulletin 2009-03, available at]
  • Grant to brokerage firm of security interest in account to cover IRA indebtedness to broker is prohibited extension of credit [Citation: Advisory Opinion 2009-03A (October 27, 2009)]
  • Underlying assets of target date or lifecycle mutual fund not plan assets of plans that invested in the mutual fund [Citation: DOL Advisory Opinion 2009-04A (December 4, 2009)]

ERISA Litigation

  • In Kennedy v. Dupont,129 S.Ct. 865 (45 EBC 2249) (January 26, 2009), the Supreme Court addressed two issues in its opinion: (1) whether the waiver of a benefit by a beneficiary is a violation of ERISA's antiassignment rule, and (2) whether the beneficiary designation was part of the governing plan documents. It concluded that, although the antiassignment rule does not nullify a spouse's waiver, as part of a divorce decree, of his or her interest in the participant's benefits, the governing documents of the plan dictated that the benefit should be paid to the former spouse in accordance with the deceased participant's beneficiary designation. This resolves a conflict in the Circuit Courts.
  • A suit against an employer for fiduciary breach relating to excessive fees paid through plan investments and failure to disclose revenue-sharing arrangement was dismissed; fiduciary breach claims against the investment provider also were dismissed because provider was not a functional fiduciary of the plan. See Hecker v. Deere & Co., 556 F.3d 575 (45 EBC 2761) (7th Cir. February 12, 2009).
  • Court denied request for equitable reformation of document, determining there was no sufficient evidence of mutual understanding that new benefit formula was an error [Citation: Cross v. Bragg, 47 EBC 1784 (4th Cir. 2009) (not selected for publication in the Federal Reporter)
  • Second trial with de novo standard of review yields judgment for defendant-employer; employer's petition for reformation of document granted due to evidence of a scrivener's error [Citation: Young v. Verizon's Bell Atlantic Cash Balance Plan (Phase II), 48 EBC 1011 (N.D.Ill. November 2, 2009)
  • Participant may pursue claims against Wal-Mart for excessive fees [Citation: Braden v. Wal-Mart Stores, Inc., 48 EBC 1097 (8th Cir. November 25, 2009)

Miscellaneous Guidance

  • Executive order suspending new regulations. Rahm Emanuel, President Obama's Chief of Staff, issued an memorandum to all departments that suspends the issuance of new proposed or final regulations (with certain limited exceptions), and withdraws any proposed or final regulations that have not been published in the Federal Register for further review. For regulations that have been published, but have not gone into effect, the responsible department is required to consider delaying the effective date by another 60 days and to re-open the notice and comment period for another 30 days to allow interested parties to provide comments about issues of law and policy raised by those rules. The first category (suspended/withdrawn regulations) applies to final regulations that had been pending with the Office of Management and Budget with respect to fee disclosures (i.e., service provider disclosures, pursuant to ERISA §408(b)(2), and participant fee disclosures, pursuant to ERISA §404(a)). The §408(b)(2) regulations had been proposed in November 2007, and the participant fee disclosure rules had been proposed in August 2008. It is anticipated that the effect of this order will be to kill these regulations and start fresh, either with a new proposal from the DOL, or to seek Congressional action instead. The second category (released regulations that have not taken effect) includes the investment advice regulations published on January 21, 2009 (DOL Reg. §2550.408g-1) that were scheduled to go into effect on March 23, 2009. Thus, the DOL must consider postponing the effective date by another 60 days (to May 22, 2009) for these regulations and re-open the public comment period.
  • Regulation Z (Truth In Lending) does not apply to participant loans effective July 1, 2010, as long as the loan is secured solely with the vested accrued benefit. This rule applies to loans from all employer-sponsored plans, including section 403(b) plans and governmental 457(b) plans, regardless of whether they are subject to Title I of ERISA. [Citation: Regulation Z, 12 C.F.R. Part 226, §226.3(g), 74 F.R. 5244 (January 29, 2009)]

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