April 17, 2014

IRS Extends Deadline for Defined Benefit Plans to Adopt Code Section 436 Amendments

The Internal Revenue Service (IRS) issued Notice 2012-70, extending the deadline for plan sponsors of defined benefit plans to adopt amendments to comply with Section 436 of the Internal Revenue Code (the Code), which generally imposes plan benefit payment and amendment restrictions if a defined benefit plan’s funding dips below specified levels.


Code Section 436 sets forth a series of limitations on the accrual and payment of benefits under an underfunded defined benefit plan (see “New Notice Requirements Effective November 1, 2012 for Single Employer Pension Plans with Funding-Related Restrictions” for more information).  Under previous IRS guidance, (see “IRS Extends Year-End Deadline for Pension Plan Amendments Under Code Section 436” for more information), the deadline for adopting the Code Section 436 amendment to reflect such funding-based restrictions was generally the last day of the plan year beginning on or after January 1, 2012 (e.g., December 31, 2012, for calendar year plans).

New Deadlines

On November 21, the IRS extended the deadline for adopting the required Section 436 amendment to the latest of the following: 

  • The last day of the plan year beginning on or after January 1, 2013 (e.g., December 31, 2013, for calendar year plans)
  • The last day of the plan year for which Code Section 436 is first effective for the plan
  • The due date (including extensions) of the employer’s tax return for the tax year that contains the first day of the plan year for which Code Section 436 is first effective for the plan 

However, plan sponsors submitting determination letter applications on or after February 1, 2013, for individually designed plans must adopt the Code Section 436 amendment prior to submitting the application.  Determination letter applications that are filed prior to February 1, 2013 (Cycle B plans), do not need to include provisions complying with Code Section 436.

Notice 2012-70 also extends the relief period under the anti-cutback requirements of Code Section 411(d)(6), which generally provide that a tax-qualified defined benefit plan may not be amended to reduce or eliminate a participant’s accrued benefit.

Defined benefit plan sponsors should review the new guidance to determine the proper deadline for Code Section 436 amendments for their plans.

© 2014 McDermott Will & Emery

About the Author


Stephen Pavlick is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C. office.  He focuses his practice on the area of employee benefit matters for large multinational corporations.  His clients include several Fortune 100 companies, and a major trade association.  He is a member of the Tax Management Advisory Board for Compensation Planning and is a regular participant at their monthly luncheons with government officials.  Stephen is a Certified Public Accountant. 


About the Author


Susan Peters Schaefer is a partner in the the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office. She focuses her practice on tax-qualified retirement plans, with a particular emphasis on employee stock ownership plans (ESOPs), and executive deferred compensation plans. She has advised clients on a wide range of matters which affect employee benefit plans, such as mergers and acquisitions, fiduciary responsibility issues, ERISA controversies and prohibited transactions. She has represented clients before the IRS and the Department of Labor.


Kary Crassweller is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office. She focuses her practice on a variety of employee benefits matters related to pension plans, 401(k) plans, executive compensation and cafeteria and welfare plans.


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