Just when the mad scramble to adopt last minute Code section 436 amendments was about to begin, the IRS has issued another extension, accompanied by a sample amendment.
Notice 2011-96, released Nov. 29, 2011, extends the deadline to adopt an interim amendment for Code section 436 to the latest of:
1) the last day of the first plan year that begins on or after Jan. 1, 2012;
2) the last day of the plan year for which Code section 436 is first effective for the plan, or
3) the due date (including extensions) of the employer’s tax return for the tax year (determined in accordance with section 5.06(2) of Rev. Proc. 2007-44, in the case of a tax-exempt employer) that contains the first day of the plan year for which Code section 436 is first effective for the plan.
This extends the previous deadline, which was contained in Notice 2010-77. It required that an amendment containing the Code section 436 provisions be adopted by the last day of the first plan year that began on or after Jan. 1, 2011 (meaning Dec. 31, 2011 for calendar year plans).
Hats off to the IRS for also giving us a sample Code section 436 amendment in Notice 2011-96. The sample amendment captures the complexity of Code section 436 while granting relief for plans that adopt the sample amendment by the deadline. It also addresses several potential issues that may be caused by adopting the amendment, including potential 411(d)(6) issues.
The IRS states that sponsors of pre-approved prototype and volume submitter plans may adopt the amendment on behalf of the pre-approved plans’ adopting employers, so if you are using a prototype or volume submitter defined benefit plan, it is worth checking with your plan document provider to see if they will be adopting a Code section 436 amendment at the sponsor level. The same goes for word-for-word sponsors of prototype and volume submitter defined benefit plans, who should check with their plan document provider to see if they will be offering a customized sample amendment, keeping in mind that the IRS is specifically limiting the amount of customizing that can be done to this amendment. Sponsors of individually designed plans, such as cash balance and DBK plans, will need to adopt the amendment directly.
It is also worth noting that the IRS sample amendment contains a number of optional provisions, so even if your plan document provider is adopting the amendment at the sponsor level, you may still want to adopt a Code section 436 amendment for each plan in order to utilize some of the optional provisions not contained in the sponsor-level amendment.
