ERISA Lawyer Blog

As I reported in my blog of Thursday, March 4, the Temporary Extensions Act of 2010 (the "Act") extended the eligibility period for the COBRA subsidy for one month. Therefore, an employee who is involuntarily terminated on or prior to March 31, 2010 (as opposed to February 28, 2010) may be eligible for the 15-month, 65% COBRA subsidy.

However, there is a new wrinkle. Prior to the Act, the employee's COBRA qualifying event had to be an involuntary termination of employment, in order for the employee to be eligible for the COBRA subsidy. Under the Act, an employee may be eligible for the COBRA subsidy if:
--his or her qualifying event is a reduction in work hours, which occurs on or prior to March 31, 2010 (but on or after September 1, 2008); and
--he or she is involuntarily terminated on or after March 2, 2010, and after the reduction in work hours.

To comply with the Act, an individual described above, who did not previously elect to receive COBRA coverage (or who let his or her coverage lapse), must be notified (during the 60-day period starting on the date of the termination) and given the opportunity to make the election. Similarly, an individual described above, who did elect to receive COBRA coverage upon the reduction in work hours, must be notified (during that 60-day period) of his or her eligibility for the COBRA subsidy. I understand that a bill has been introduced in Congress to further extend the COBRA subsidy, so stay tuned.

The President has just signed the Temporary Extension Act of 2010 (the "Act"). Under the Act, eligibility for the COBRA subsidy has been extended one month, meaning that an employee who has an involuntary termination of employment on or prior to March 31, 2010 (rather than on or by February 28, 2010) may be eligible for the subsidy. The Employee Benefits Security Administration (the "EBSA") has updated the introduction on the COBRA webpage at it website to reflect this extension and has added a link to the Act.

The President has just signed the Temporary Extension Act of 2010 (the "Act"). Under the Act, eligibility for the COBRA subsidy has been extended one month, meaning that an employee who has an involuntary termination of employment on or prior to March 31, 2010 (rather than on or by February 28, 2010) may be eligible for the subsidy. The Employee Benefits Security Administration (the "EBSA") has updated the introduction on the COBRA webpage at it website to reflect this extension and has added a link to the Act.

The Employee Benefits Security Administration (the "EBSA") has posted on its website an Application for Expedited Review of Denial of COBRA Premium Reduction, updated for the changes made to COBRA by the Department of Defense Appropriations Act, 2010 ("DODA 2010").

By way of background, the American Recovery and Reinvestment Act of 2009 ("ARRA") provides for a reduction in the premiums that must be paid for COBRA health care coverage. Under ARRA, eligible individuals pay only 35 percent of their COBRA premiums, and the remaining 65 percent is reimbursed to the employer or insurer through a tax credit (the "Subsidy"). This Subsidy was available for 9 months, and to qualify for the Subsidy, an individual had to experience an involuntary termination of employment during the period of September 1, 2008 through December 31, 2009. DODA 2010 amended ARRA and COBRA to make the Subsidy available for 15 months, and to extend the period during which the involuntary termination of employment must occur until February 28, 2010.

Under ARRA, as amended by DODA 2010, individuals who are denied the Subsidy may request an expedited review of the denial by the U.S. Department of Labor. The Department must make a determination within 15 business days of receipt of a completed request for review. The request for review is made on the Application for Expedited Review of Denial of COBRA Premium Reduction, which the EBSA has now updated to reflect DODA 2010. The updated Application is here.

In Nestlé Purina Petcare Co. v. Commissioner of Internal Revenue, No. 09-1381 (8th Cir. 2010), the Nestlé Purina Petcare Company, known as "Ralston" during the relevant years, had established an employee stock ownership plan (an "ESOP"). A trust held the ESOP's assets, which consisted primarily of Ralston preferred stock. When a participant left Ralston, the participant was required to direct the ESOP to convert the value of the preferred stock allocated to his or her ESOP account into cash, shares of Ralston common stock, or a combination of both. If a participant elected to receive cash, the trust could require that Ralston purchase Ralston preferred stock from it, paying the trust a cash dividend (a "redemptive dividend") in exchange for the stock. From the redemptive dividend, the Trust could distribute to the participant a "cash distribution redemptive dividend" , as all or part of the total cash to be paid to the participant. The question for the Court was whether Ralston could deduct the cash distributed redemption dividend. The Tax Court had ruled that it could not.

In answering this question, the Court revisited its earlier decision in General Mills, Inc. v. United States, 554 F.3d 727 (8th Cir. 2009), in which it had concluded that section 162(k)(1) of the Internal Revenue Code (the "Code")-which says that no deduction is allowed for any amount paid by a corporation in connection with the redemption of its stock - bars the deduction otherwise allowed by section 404(k)(1) of the Code for amounts paid by an employer to an ESOP's trust in order to redeem shares of the employer's stock. Ralston had argued that the exception in section 162(k)(2)(A)(iii) applies. Under that exception, section 162(k)(1) does not apply to-and will not bar a deduction for-dividends paid within the meaning of section 561 of the Code. However, the Court said that the exception in section 162(k)(2)(A)(iii) applies only when the Code has authorized the taxpayer to take a "deduction for dividends paid" within the meaning of section 561. Section 404(k) does not authorize such a deduction. Therefore, the exception in section 162(k)(2)(A)(iii) is not available here. The Court therefore concluded that Ralston may not deduct the cash distribution redemptive dividends, and affirmed the Tax Court's decision.

As noted in my last blog, in Notice 2010-15, the IRS provides guidance on certain provisions of the Heroes Earnings Assistance and Relief Tax Act of 2008 (the "HEART Act " or "Act"). One topic covered is distributions from 401(k), 403(b) and 457 plans.

The Notice indicates that section 414(u)(12)(B) of the Internal Revenue Code (the "Code"), as added by section 105 of the Act, treats any individual, who is on active military duty for more than 30 days, as having severed from employment for purposes of receiving a distribution from a 401(k), 403(b) or 457 plan. Thus, if the plan permits, a 401(k), 403(b) or 457 plan may make a distribution to this individual. However, if the plan does so, then the individual cannot make elective deferrals or employee contributions to any plan of the employer during the 6-month period beginning on the date of the distribution. The distribution is generally an eligible rollover distribution, and is thus eligible for rollover treatment.

The Notice points out that, under pre-Act section 72(t)(2)(G)(iii) of the Code, the 10% penalty for an early payment from a 401(k) plan or 403(b) plan does not apply to a "qualified reservist distribution". A qualified reservist distribution is one which is:

--attributable to elective deferrals under a 401(k) or 403(b) plan; and

--made to a member of the reserves who has been ordered or called to active duty for more than 179 days or for an indefinite period.

A qualified reservist distribution can be made, without regard to otherwise applicable restrictions under section 401(k) and 403(b) on in-service distributions of amounts attributable to elective deferrals. Prior to the Act, the rules for qualified reservist distributions applied to individuals ordered or called to active duty after September 11, 2001, and before December 31, 2007. Section 107 of the Act amends section 72(t)(2)(G) of the Code to delete the reference to December 31, 2007, so that the special rules for qualified reservist distributions no longer have an expiration date.

As a technical matter, the Notice states that, if an individual is eligible under a 401(k) plan to receive a distribution as a result of a deemed severance from employment under section 414(u)(12)(B), and is also eligible under the plan to receive a qualified reservist distribution under section 72(t)(2)(G)(iii), then the distribution is treated as a qualified reservist distribution. This way, the distribution is not subject to the 6-month restriction on elective deferrals and employee contributions, or to the 10-percent early payment penalty under section 72(t). Presumably, the same rule would apply in the case of a distribution from a 403(b) plan.

The Notice indicates that a 401(k) plan must be amended by the final day of the first plan year starting on or after January 1, 2010 (2012 for government plans) to reflect the above rules, to the extent that the plan wishes to currently use them.

In Notice 2010-15, the IRS provides guidance, in the form of Q & As, on certain provisions of the Heroes Earnings Assistance and Relief Tax Act of 2008 (the "Act"). The Notice addresses the following sections of the Act: section 104 (relating to survivor and disability payments with respect to qualified military service), section 105 (relating to treatment of differential military pay as wages), section 107 (relating to distributions from retirement plans to individuals called to active duty), section 109 (relating to contributions of military death gratuities to Roth IRAs and Coverdell education savings accounts), and section 111 (relating to an employer credit for differential wage payments to employees who are active duty members of the uniformed services).

Among the points made by the Notice are:

--Under section 401(a)(37) of the Internal Revenue Code (the "Code"), as added by section 104 of the Act and applying to qualified retirement plans, the survivors of a participant who dies while performing qualified military service are entitled to any additional benefits (other than benefit accruals relating to the period of qualified military service) that would be provided under the plan if the participant had resumed employment and then terminated employment on account of death. These benefits include accelerated vesting, ancillary life insurance benefits, and other survivor's benefits which are contingent on a participant's termination of employment on account of death.

-- Section 401(a)(37) provides that vesting service, but not benefit accruals (whether benefit accruals under a defined benefit plan or contributions under a defined
contribution plan), must be provided for a period of qualified military service for
purposes of determining the amount of, and entitlement to, any death benefit payable with respect to a deceased participant.

--Section 401(a)(37) does not apply with respect to a participant who dies while
performing military service, unless that participant had reemployment rights under USERRA with the employer maintaining the plan.

--Section 414(u)(9) of the Code, added by section 104 of the Act and applying to qualified retirement plans, allows an employer to provide benefit accruals to a participant who dies or becomes disabled while performing qualified military service, as if the individual had resumed employment in accordance with his or her USERRA reemployment rights on the day preceding death or disability, and then died or became disabled the next day. The Notice indicates that this rule may be used only if all participants are treated the same way. This rule is permissive, not mandatory.

--A plan must be amended to reflect the requirements of section 401(a)(37) and (if used by the employer) section 414(u)(9) by the last day of the first plan year beginning on or after January 1, 2010 (January 1, 2012, for governmental plans).

In my blog yesterday (January 13), I discussed the new FAQs issued by the Department of Labor (the "DOL") on the extension of the 9 month COBRA Subsidy originally made available by the American Recovery and Reinvestment Act of 2009 ("ARRA"), and extended to 15 months by The Department of Defense Appropriations Act, 2010 ("DODA"). In that discussion, I identified a "Transition Period" as being the period which begins immediately after the end of an individual's 9 month period of entitlement to the Subsidy under ARRA prior to its amendment by DODA. Plan administrators are required to provide notices to COBRA beneficiaries about the Subsidy and the DODA extension. The FAQs indicate the following about these notices.

After ARRA was enacted, the Department of Labor (the "DOL") created a "General Notice", which a plan administrator of a plan providing COBRA coverage may use to satisfy its obligation to provide notice of COBRA rules and rights, and which includes information on the Subsidy provided by ARRA. A plan administrator must provide, as part of the COBRA election notice materials, a General Notice to all qualified beneficiaries, not just covered employees, who experience a qualifying event at any time from September 1, 2008 through February 28, 2010, regardless of the type of qualifying event. For qualifying events occurring after December 19, 2009, a General Notice-updated to reflect DODA- must be provided within the normal timeframe for providing a COBRA election notice.

If an individual has already been provided COBRA election notice materials which did not include a General Notice that was updated to reflect DODA, that individual must be provided a separate notice of the DODA changes to ARRA (the "Premium Assistance Extension Notice"). Listed below are the affected individuals and the associated timing requirements.

• Individuals who were "assistance eligible individuals" (see my January 13 blog) as of October 31, 2009 (and are not in a Transition Period), and individuals who experienced a termination of employment on or after October 31, 2009 and lost health coverage, must be provided the Premium Assistance Extension Notice by February 17, 2010; or
• Individuals who are in a Transition Period must be provided the Premium Assistance Extension Notice within 60 days after the start of the Transition Period.

Further, if an individual experienced a qualifying event at some time on or after October 31, 2009 (but before December 19, 2009) and was provided a timely COBRA election notice which is, or is modeled after, the DOL's original ARRA General Notice, then:
--if the qualifying event was something other than a termination of employment, nothing needs to be done.
--if the qualifying event was a termination of employment, the Premium Assistance Extension Notice must be provided by February 17, 2010.

If an individual is covered under more than one category of notice recipients, then that individual must be provided with the notice due at the earliest date. The DOL has issued a revised General Notice and a Premium Assistance Extension Notice. These notices may be found here.

On its website, the Department of Labor (the "DOL") has added new facts and questions ("FAQs") on the COBRA subsidy extension. The new FAQs are here. The new FAQs say the following.

The federal government's stimulus package, which was enacted in February 2009 as the American Recovery and Reinvestment Act of 2009 ("ARRA"), temporarily reduces, for assistance eligible individuals, the premium for COBRA continuation health care coverage, or comparable State law continuation health care coverage ("COBRA coverage"). The premium reduction, called the "Subsidy", reduces the premium for COBRA coverage to 35% of the amount of the premium that otherwise would be charged, and is available for 9 months. An "assistance eligible individual" is an individual who is eligible for COBRA coverage because of the individual's own or a family member's involuntary termination from employment that occurred during the period of September 1, 2008 through December 31, 2009. An individual who is eligible for other group health coverage (such as a spouse's plan) or Medicare, or who is otherwise not entitled to COBRA coverage, is not eligible for the Subsidy.

The Department of Defense Appropriations Act of 2010 ("DODA") was signed by the President on December 19, 2009. DODA amended ARRA to extend:
-- the period during which the involuntary termination of employment must occur to qualify for the Subsidy for two months (from January 1, 2010 to February 28, 2010); and
-- the maximum period for receiving the Subsidy for an additional six months (from nine to 15 months).

DODA creates a "transition period", which begins immediately after the end of an individual's 9 month period of entitlement to the Subsidy under ARRA prior to its amendment. If an individual's transition period starts in December, and the individual fails to pay the December and January premiums (the "Late Premiums") for COBRA coverage, the individual will be able to reinstate his or her COBRA coverage, and receive the additional six months of the Subsidy, so long as the Late Payments are made retroactively, by the latest of: February 17, 2010, 30 days after the notice (described below) was provided, or the end of the otherwise applicable grace period under the applicable plan for the Late Payments. An individual in a transition period must be provided notice of the extension of the Subsidy within 60 days after the first day of the period. The notice must include information on the extension of the Subsidy from 9 to 15 months, and inform the individual that he or she may make the Late Payments retroactively.

Also, if the individual's transition period starts in December, and the individual already paid the full December premium, then the individual should contact the plan administrator, employer sponsoring the plan, or insurance issuer to discuss obtaining, due to the extended Subsidy, a refund or credit against future premium payments. If this individual receives a bill for 100% of the December premium, he or she should pay only 35% of the premium, by the later of February 17, 2010 or 30 days after notice of the Subsidy extension is provided by the plan administrator. Furthermore, this individual may pay only 35% of the December premium, even if he or she has not yet received an updated bill or the notice described above from the plan administrator.

The FAQs remind us that, if an individual's plan or insurer determines that he or she is not eligible for the Subsidy, the individual can request an expedited review of the denial from the DOL (for private sector plans) or the Department of Health and Human Services (for Federal, State, and local government employees, as well as continuation health care coverage under State law).

The FAQs also discuss the notices that a plan administrator must provide to an individual under ARRA, as amended by DODA-to be covered in a future blog.

A lot of people are considering the conversion of all or a portion of their retirement savings to a Roth IRA in 2010. The Winter 2010/Volume 9 edition of the IRS's Employee Plans News contains, among other matters pertaining to Roth IRAs, some guidance on converting a traditional IRA or other retirement savings to a Roth IRA after 2009. Here is what it says.
Beginning January 1, 2010, the income and filing status requirements for rollovers (including conversions) to a Roth IRA will be eliminated. Additionally, for rollovers to a Roth IRA in 2010 only, a special 2-year option for reporting the taxable portions of the rollover will apply. Under the current rules, you can roll over a traditional individual retirement arrangement (IRA), a SEP IRA, a SIMPLE IRA and an eligible rollover distribution (ERD) from your retirement plan (other than from a designated Roth account) and from a plan in which you are the named beneficiary to a Roth IRA only if you meet both these requirements:
• your modified AGI for Roth IRA purposes is $100,000 or less; and
• your filing status is not married filing separate.

There are no such restrictions on rolling over amounts into a Roth IRA from either another Roth IRA or from a designated Roth account. Any previously untaxed amounts must be included in your gross income in the year of the rollover.
Under the new rules for 2010, regardless of your income or filing status, you will be able to roll over (convert) the following to a Roth IRA:
• your traditional IRA, SEP IRA or SIMPLE IRA;
• an ERD from your retirement plan (for example, a 401(k) or a 403(b) plan); or
• an ERD from a retirement plan for which you are a beneficiary.

For rollovers and conversions to a Roth IRA in 2010 only, you will have the option of reporting the taxable portion of your rollover in your gross income for 2010, or reporting half in 2011 and half in 2012.

Here is some information from the Fact Sheet:

The American Recovery and Reinvestment Act of 2009 ("ARRA"), as amended on December 19, 2009 by the Department of Defense Appropriations Act, 2010 ("DODA") provides for premium reductions for health benefits under COBRA. Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. To qualify, individuals must experience a COBRA qualifying event that is the involuntary termination of a covered employee's employment. The involuntary termination must occur during the period that began September 1, 2008 and ends on February 28, 2010. The premium reduction applies to periods of health coverage that began on or after February 17, 2009 and lasts for up to 15 months. The premium reduction for an individual ends upon eligibility for other group coverage or Medicare, after 15 months of the reduction, or when the maximum period of COBRA coverage ends, whichever occurs first. Individuals paying reduced COBRA premiums must inform their plans if they become eligible for coverage under another group health plan or Medicare. If an individual's modified adjusted gross income ("modified AGI") exceeds $125,000 (or $250,000 for joint filers), then the amount of the premium reduction must be repaid, in increasing amounts as modified AGI increases. Thus, an individual may waive his or her right to the premium reduction.

COBRA generally does not apply to plans sponsored by employers with fewer than 20 employees. Many States have requirements which are similar to COBRA for insurance companies that provide coverage to small employers. The ARRA/DODA premium reduction is available for insurers covered by these State laws.

DODA extended the COBRA premium reduction eligibility period for two months until February 28, 2010 and increased the maximum period for receiving the subsidy for an additional six months (from nine to 15 months). In addition, individuals who had reached the end of the reduced premium period before the legislation extended it to 15 months will have an extension of their grace period to pay the reduced premium. To continue their coverage they must pay the 35 percent of the premium by February 17, 2010, or, if later, 30 days after notice of the extension is provided to them by their plan administrator. Individuals who lost their subsidy and paid the full 100 percent premium in December 2009 should contact their plan administrator or employer sponsoring the plan to discuss a credit for future months of coverage or a reimbursement of the overpayment.

ARRA, as amended, mandates the provision of certain notices. As part of the COBRA election notice, plan administrators must provide information about the premium reduction to all individuals who have COBRA qualifying events from September 1, 2008 through February 28, 2010. Plan administrators must also provide notice about the changes made to the premium reduction rules by DODA to individuals who have already been provided a COBRA election notice (unless the election notice included the updated premium reduction information) as follows:
• Individuals who are eligible for the premium reduction must be provided this notice by February 17, 2010;
• Individuals who experience a termination of employment on or after October 31, 2009 and lose health coverage must be provided this notice within the normal timeframes for providing continuation coverage notices; and
• Individuals who are in a "transition period" (a period that begins immediately after the end of the nine months of premium reduction in effect under ARRA before the amendments made by DODA, as long as those nine months ended before December 19, 2009 and the premium reduction requirements of DODA would apply due to the extension from nine to 15 months) must be provided this notice within 60 days of the first day of the transition period.

In CNG Transmission Management VEBA v. United States, 06-CV-541 (U.S. Federal Circuit 2009), the U.S. Federal Circuit Court of Appeals held that a voluntary employees' beneficiary association (the "VEBA") may not avoid income tax by claiming that it used investment income to pay members' benefits, in order to circumvent the limit on exempt function income ("EFI") in section 512(a)(3)(E)(i) of the Internal Revenue Code (the "Code"). In this case, the VEBA had filed an amended Form 990-T, requesting a refund of income tax it had paid on unrelated business taxable income ("UBTI") , on the ground that the amount it had reported as UBTI was instead non-taxable EFI. The IRS denied the VEBA's refund request.

In analyzing the case, the Court said that a VEBA, which is otherwise exempt from federal income taxation under section 501(a) of the Code, is nevertheless taxed on its UBTI under section 511 of the Code. UBTI generally consists of all income other than EFI. Under the Code, there are two classes of EFI: (1) member contributions to the VEBA, and (2) income, including investment income, which is set aside (i.e., held by the VEBA) for the payment of life, sick, accident or other member benefits. However, an amount will not be treated as "set aside", to the extent it results in the VEBA having, at year-end, assets set aside to pay benefits in excess of the statutory account limit under sections 419A and 512(a)(3)(E)(i) of the Code (the "Statutory Account Limit") for that year. This limit is generally the amount necessary to pay for incurred but unpaid benefit claims as of the end of the year in question, as well as certain related administrative costs. The issue, in this case, is whether the VEBA's investment income resulted in the VEBA having an amount of assets set aside to pay benefits which is in excess of the Statutory Account Limit-if there is no excess, there is no UBTI and the VEBA could get its refund. The VEBA's position is that its investment income did not result in any excess because the VEBA spent that income during the year on member benefits. The IRS's position is that, because the VEBA's investment income caused the VEBA's total assets set aside to pay benefits to exceed the Statutory Account Limit, that excess cannot be classified as EFI and is therefore taxable as UBTI.

The Court ruled that the IRS was correct. The key is that the VEBA's investment income "resulted in" the VEBA's total assets set aside to pay benefits exceeding the Statutory Account Limit. That does not change merely because the VEBA claims that it spent money from investment income, rather than money from some other source, on member benefits. The Code does not say that a VEBA's investment income results in a year-end excess of the VEBA's assets set aside to pay benefits over the Statutory Account Limit only to the extent that the actual dollars included in those assets are directly traceable to income made on investments.

Further, the IRS's regulation, at section 1.512(a)-5T. must be followed. Under that regulation, a VEBA's UBTI, for any year, will generally be equal to the lesser of (1) the VEBA's income for that year or (2) the excess of the total amount set aside (i.e., the VEBA's total assets held to pay benefits) at year-end over the Statutory Account Limit. Here, the VEBA did not establish the amount in prong (2), so its UBTI equals the amount in prong (1). The VEBA has income, in prong (1), even if it applied the income to the payment of members' benefits.

As a result of the above, the VEBA is not entitled to a refund.

Comment: It seems strange to be able to conclude, as the Court did, that income can result in an asset accumulation even though the income has been spent: the income is either there or it isn't . Even so, there is still Treasury regulation section 1.512(a)-5T to contend with. It is equally as strange that the VEBA did not try to establish the amount in prong (2) above, since it might have been able to obtain all or a part of the desired tax refund by doing so.

I just read that the President has signed the Fiscal Year 2010 Defense Appropriations Act (the "Act"), which extends the 65% COBRA premium reduction subsidy. The subsidy is provided by the American Recovery and Reinvestment Act of 2009 ("ARRA"). The Act extends the eligibility period (i.e., the period during which involuntary job loss must take place) for the subsidy for an additional two months (through Feb. 28, 2010) and the maximum period for receiving the subsidy for an additional six months (from nine to 15 months). I'll post more details here as I get them.

A press release from the Department of Labor announcing the extension of the COBRA premium reduction subsidy is here.

In Notice 2009-97 (the "Notice"), the IRS extends the deadline for amending qualified retirement plans to meet certain requirements of the Internal Revenue Code (the "Code"), which were added to the Code by the Pension Protection Act of 2006 ("PPA "), and which were subsequently modified by the Worker, Retiree, and Employer Recovery Act of 2008 ("WRERA"). Under the Notice, the deadline for amendment is extended to the last day of the first plan year that begins after 2009, and applies to:

--the deadline for amending single-employer defined benefit plans to meet the requirements of sections 401(a)(29) and 436 of the Code, relating to funding-based limits on benefits and benefit accruals;

--the deadline for amending cash balance and similar defined benefit plans to meet the requirements of section 411(a)(13) (other than section 411(a)(13)(A)) and section 411(b)(5) of the Code, relating to vesting and other special rules applicable to those plans; and

--the deadline for amending defined contribution plans to meet the requirements of section 401(a)(35) of the Code, relating to diversification requirements when the plan invests in employer securities.

Generally, prior to this Notice, the above amendments had to be adopted by the last day of the first plan year beginning after 2008.The Notice applies to both interim (required) or discretionary plan amendments, as defined in Revenue Procedure 2007-44, pertaining to the above Code sections. The employer must operate its plan in compliance with the requirements of the above Code sections on and after their effective date.

The Notice also provides limited relief from the anti-cutback requirements of section 411(d)(6) of the Code for amendments that are adopted by the extended deadline for amending a plan to meet the requirements of sections 401(a)(29) and 436. Under this relief, an interim plan amendment, which eliminates or reduces a Code section 411(d)(6) protected benefit, will not cause a plan to fail to meet the anti-cutback requirements of section 411(d)(6), if the amendment is adopted by the last day of the first plan year beginning after 2009, and the elimination or reduction is made only to the extent necessary to enable the plan to meet the requirements of sections 401(a)(29) and 436. In addition, this Notice provides that limited section 411(d)(6) relief is expected to be granted for amendments that are adopted by the extended deadline for amending a plan to meet the requirements of section 411(b)(5), once final regulations under sections 411(a)(13) and 411(b)(5) are issued.

IRS Notice 2009-98 contains the 2009 Cumulative List of Changes in Plan Qualification
Requirements (the "2009 Cumulative List"). The 2009 Cumulative List is to be used for guidance in amending qualified retirement plans, primarily by employers maintaining individually designed plans in Cycle E (i.e., the last digit of the employer's EIN is 5 or 0). Cycle E begins on February 1, 2010 and ends on January 31, 2011. Pursuant to IRS Notice 2008-108, as an alternative to submitting a plan in Cycle D (February 1, 2009 - January 31, 2010), an employer, whose first plan year beginning after 2008 ends on or after February 1, 2010, may defer submission of its plan until Cycle E.

Under Rev. Proc. 2007-44, each year the IRS issues a list which identifies statutory, regulatory, and other changes to the plan qualification rules, and which must be taken into account by employers who submit applications to the IRS for individual determination letters on or after the February 1st following the date of issuance. The 2009 Cumulative List reflects law changes under, among other acts, the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"), with technical corrections made by the Job Creation and Worker Assistance Act of 2002 ("JCWAA"), the Pension Funding Equity Act of 2004 ("PFEA"), the American Jobs Creation Act of 2004 ("AJCA"), the Pension Protection Act of 2006 ("PPA '06"), the U.S. Troop Readiness,Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act of 2007, the Heroes Earnings Assistance and Relief Tax Act of 2008 ("HEART Act"), the Emergency Economic Stabilization Act of 2008 ("EESA"), and the Worker, Retiree, and Employer Recovery Act of 2008 ("WRERA").

In Notice 2009-98, the IRS says that it will not consider, when reviewing submissions made for Cycle E, any:

-- guidance issued after October 1, 2009;

-- statutes enacted after October 1, 2009;

-- qualification requirements first effective in 2011 or later; or

-- statutory provisions that are first effective in 2010, for which there is no
guidance identified in the notice.

Terminating plans must include all law changes in effect at the time of
termination. The Notice contains special rules for the Heart Act and WRERA.