IRS Issues Interim Rules for Pension Funding Relief

March 17, 2009 ( - The Internal Revenue Service has issued Notice 2009-22, which 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 (WRERA).

The notice also provides automatic approval for a change in asset valuation method for plan years beginning during 2009 to any permissible asset valuation method.

The notice describes the rules expected to be incorporated in future regulations for adjusting asset values for expected earnings, pursuant to § 430(g)(3)(B) of the Internal Revenue Code as added by the Pension Protection Act of 2006 (PPA) and amended by WRERA (see Bush SIgns RMD, Pension Relief Bill ), using an assumed rate of return. The rules modify the determination of the adjusted fair market value of plan assets for a prior determination date that is used in determining the average of fair market values under § 430(g)(3)(B) as provided in the proposed regulations.

Other rules for the asset valuation method under § 430(g)(3)(B) continue to apply. For example, the IRS said the period of time between each of the determination dates (treating the valuation date as a determination date) must be equal and the method of determining the value of plan assets (including the selection of the determination dates) is part of the plan’s funding method.

For plans that complied with applicable requirements for plan years starting in 2008 (such as quarterly contribution requirements under § 430(j) and benefit restrictions under § 436) based on the asset averaging method permitted before the enactment of WRERA, no retroactive changes to the actuarial value of assets need be made to comply with the amendments to made by WRERA. However, a plan for which the actuarial value of plan assets for purposes of §§ 430 and 436 was determined based on the proposed regulations is permitted to have the actuarial value of plan assets re-determined.

The IRS warned plans to take into account the risk that any such redetermination may result in plan operations for the plan year having been inconsistent with the requirements of section 206(g) of ERISA (the provision that parallels § 436 of the Code).

The Notice is here .