IRS Extends Transfer Relief for Certain Puerto Rican Trusts

December 19, 2011 ( – The Internal Revenue Service (IRS) has extended transitional relief for certain Puerto Rican group trusts and certain qualified retirement plans.

Specifically, Notice 2011-6 extends and expands the transition relief relating to the treatment of transfers of assets from a qualified plan to plans that are qualified under the Puerto Rican code for certain group trusts, certain retirement trusts that qualify under the Puerto Rico Internal Revenue Code and that participate in group trusts and certain qualified retirement plans that benefit Puerto Rico residents. The notice also provides additional time for governmental retiree benefit plans described in § 401(a)(24) of the Internal Revenue Code (Code) (§ 401(a)(24) plans) to be amended to satisfy the applicable requirements of Rev. Rul. 2011-1, which extended transitional relief from those transfers being considered a plan distribution to January 1, 2012.  

The IRS said it recognizes that a sponsor of a qualified retirement plan that benefits Puerto Rico residents may need additional time to evaluate whether to spin-off the portion of the plan benefiting Puerto Rico residents to a section 1022(i)(1) plan in order to consider the effect of the changes to the Puerto Rico Code enacted earlier this year.  

The Notice modifies Rev. Rul. 2008-40 to extend the relief under the Transition Relief heading in Rev. Rul. 2008-40 (“Transfers to plans under section 1022(i)(1) of ERISA”) for transfers to a section 1022(i)(1) transferee plan from any qualified retirement plan until December 31, 2012, regardless of whether the qualified retirement plan participates in a group trust.  

In the case of a § 401(a)(24) plan for which the authority to amend the plan is held by a legislative body that meets in legislative session, the plan will not fail to satisfy the requirements of Rev. Rul. 2011-1 if the governing document is modified to satisfy the applicable requirements of Rev. Rul. 2011-1 by the earlier of the close of the first regular legislative session of the legislative body with the authority to amend the plan that begins on or after January 1, 2012, or January 1, 2015.   

The IRS is requesting comments on the Notice.  

Full text of the Notice is available at