IRS Extends Deadline To Adopt Plan Amendments Under Section 436

The IRS extended the deadline (Notice 2012-70) for defined benefit plans to adopt plan amendments to satisfy the Section 436 limitations on the accrual and payment of benefits under certain underfunded single employer defined benefit plans. Section 436 was added by the Pension Protection Act of 2006 and sets forth a series of limitations on the accrual and payment of benefits under an underfunded defined benefit plan. Section 436 is generally effective for plan years that begin on or after Jan. 1, 2008. The limitations are based on the plan's adjusted funding target attainment percentage (AFTAP). If the AFTAP is less than 60%, the plan is not permitted to make single sum distributions, and benefit accruals must cease. When a plan's AFTAP is less than 80% but not less than 60%, there is a 50 percent limitation on single sum payments, and no amendment that increases benefits can be made to the plan.