May 1, 2009

IRS Extends Deadline for WRERA Zone Status Freeze

On April 30, 2009, the Internal Revenue Service (IRS) released Notice 2009-42,1 extending the deadline for certain multiemployer plans to make elections under Sections 204 and 205 of the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA).

Brief Background

WRERA2 provides two types of funding relief to multiemployer plans: a one-year "zone status" freeze for all plans and a three-year correction period extension for plans in endangered status ("yellow zone") and critical status ("red zone"). The relief that is available to any particular plan depends upon its zone status in the first plan year it is subject to the funding provisions of the Pension Protection Act of 2006 (PPA'06). Additional information about this relief recently was published by the IRS in IRS Notice 2009-31.3

The New Guidance

Under the new guidance:

  • The deadline for a zone freeze election under WRERA §204 is now the later of June 30, 2009 (instead of April 30, 20094) and the date that is 30 days after the due date of the annual certification of endangered or critical status for the election year.
  • The earliest date by which an election for a correction period extension under WRERA §205 is required to be made is now June 30, 2009.

The new guidance also provides relief for those plans that will have to arbitrate the WRERA election decision. The IRS will automatically approve a request to revoke an election made by the modified deadline, if the following circumstances apply:

  • The trustees have not been able to agree about making an election so that the decision must be resolved through arbitration.
  • The trustees make an election by the modified deadline that is contingent upon the resolution of the arbitration, and
  • The resolution of the arbitration is not to make the election.

Other Implications of the Guidance

It appears that the extended deadline will flow through to the requirement that the IRS be notified of the election under §IV.2 of the original guidance. Under that guidance, when the WRERA election is made after the actuarial certification is submitted, the submission deadline is 30 days following the date of the election.

Similarly, it appears that the extended deadline also will flow though to the special notice that plans electing to stay in neither endangered nor critical status ("green zone") must provide under §V.1 of the original guidance because that deadline is 30 days after the later of the actuarial certification for the election year or the date of the election.

In addition, it appears that if a calendar-year plan that was in the green zone last year, but is in the yellow or red zone this year, decides to delay its election, the yellow or red zone notices were still due April 30, 2009, and a follow-up WRERA freeze notice will be required if the freeze is later elected.

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As with all issues involving the interpretation or application of laws and regulations, trustees of multiemployer pension plans should rely on fund counsel for authoritative advice on the interpretation and application of PPA'06, including WRERA's temporary funding relief and related guidance. Segal can be retained to work with trustees and their attorneys to comply with PPA'06.

1
Notice 2009-42 is available on the IRS Web site. (Click on the following text to return to the Compliance Alert.)
2
WRERA was signed into law on December 23, 2008 as Public Law 110-458. For more information on WRERA, see The Segal Company's December 2008 Bulletin, "Pension Relief Bill's Provisions Affecting Multiemployer Plans," which can be accessed from the following Web page: http://www.segalco.com/publications-and-resources/multiemployer-publications/bulletins/?id=1114. (Click on the following text to return to the Compliance Alert.)
3
Notice 2009-31 is available on the IRS Web site. (Click on the following text to return to the Compliance Alert.)
4
The new guidance makes the change by substituting "June 30, 2009" for "April 30, 2009" wherever the April date appears in Section IV.1 of the original guidance (IRS Notice 2009-31). (Click on the following text to return to the Compliance Alert.)

 

Compliance Alert, The Segal Company's periodic electronic newsletter summarizing important developments affecting benefit plan compliance, is for informational purposes only. It is not intended to provide authoritative guidance. On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for legal advice.

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